Canada December producer price index +4.9% y/y vs +5.8% expected

• Prior was +6.1%
• Prices m/m -0.6% vs +0.3% expected
• Prior m/m +0.9%

Raw materials price index:

• Prices y/y +6.4% vs +6.4% prior
• Prices m/m +0.3% vs +0.3% prior

This is a nice dip and adds to the Canadian inflation mystery. Earlier this week, December Canadian CPI ran hot on the headline but the core number decelerated. Now we see there are less pressures in the pipeline in a welcome reprieve for the Bank of Canada.

In terms of details, the prices of energy and petroleum products (-7.2%) led the index’s monthly decrease in December with gasoline prices down 9.6%. The prices of lumber and other wood products declined 3.0% in December,
the largest month-over-month decline for the commodity group since
May 2025. It’s been a disastrous cycle for the wood-products business in Canada as high interest rates have crushed housing demand while the US imposed further tariffs.

Most commodity groups dragged down the index on the month but gold, silver and copper were notable lifts.

For background:

The Canadian Producer Price Index (PPI) and the Raw Materials Price Index (RMPI) are closely watched inflation gauges that sit earlier in the pricing pipeline than consumer inflation. They help explain where cost pressures are coming from before they reach households.

The PPI measures the prices that Canadian producers receive for goods as they leave the factory gate. It tracks price changes for a wide range of manufactured products, such as motor vehicles, machinery, energy products, and food. Importantly, it excludes indirect taxes, transportation margins, and retail markups, making it a cleaner view of underlying producer-level pricing. The index reflects prices received by domestic producers, whether goods are sold at home or exported, and is influenced heavily by commodity prices, exchange rates, and global supply chains.

The RMPI goes one step further upstream. It measures the prices paid by Canadian manufacturers for key raw materials, including crude oil, metals, lumber, grains, and other inputs. Because these prices tend to be volatile, the RMPI often moves sharply month to month and can act as an early warning signal for future changes in the PPI and, eventually, consumer inflation.

Together, the two reports help economists and markets assess cost pressures building in the economy, margins facing producers, and potential pass-through to consumer prices in the months ahead.

This article was written by Adam Button at investinglive.com.