Canadian producer prices increased 1.5 percent in October after a 1.0 percent gain in September, leading to a 6.0 percent appreciation year-over-year. Excluding energy and petroleum, wholesale prices were up 1.9 percent on the month and 6.5 percent from a year earlier. Energy and petroleum prices fell 1.0 percent on the month but were up 1.9 percent year-over-year.

Metal, lumber and energy prices all pushed the index higher in October.

Prices for primary non-ferrous metal products rose 9.8 percent on the month, the largest advance since the series started in January 2010. Precious metals explained most of the increase, with unwrought gold and gold alloys up 12.0 percent, silver and silver alloys up 17.2 percent, and platinum and their alloys up 16.5 percent. Ongoing safe-haven demand amid global trade tensions and uncertainty boosted prices. Tight global supply and sustained industrial demand added to the upward pressure for silver and platinum. Primary non-ferrous metal product prices climbed 31.4 percent year-over-year.

Primary ferrous metal product prices also increased on the month, by 3.7 percent, largely due to an 8.7 percent gain in unwrought copper and copper alloys on concerns over supply shortages related to global production disruptions this year. In September, mudslides led to production disruptions in Indonesia, a major producer.

Also contributing to upward pressure was a 4.3 percent increase in lumber prices led by a 6.9 percent gain in softwood lumber. Operational curtailments contributed to lower supply in the industry over the recent months. The U.S. also added 10 percent tariffs on Canadian lumber, effective October 4, leading buyers to frontload purchases at the beginning of the month.

The Raw Materials Price Index (RMPI) rose 1.6 percent from September and 5.8 percent from October 2024. Excluding crude energy products, the index was up 4.2 percent and 19.3 percent, respectively. Crude energy prices fell 4.3 percent on the month and 16.7 percent year-over-year amid global oversupply.

By contrast, a 9.0 percent gain in metal ores, concentrates and scrap prices explained much of the RMPI monthly advance. Here too, precious metals were behind the monthly increase, with prices for gold, silver, and platinum group metal ores and concentrates up 13.8 percent, the largest gain since August 2020 and the 14th consecutive monthly increase. The year-over-year advance for this subcategory was 54.0 percent. Overall metal ores, concentrates and scrap prices rose 33.8 percent year-over-year.

The Industrial Product Price Index (IPPI) reflects the prices that producers in Canada receive as the goods leave the plant gate. The IPPI excludes indirect taxes and all the costs that occur between the time a good leaves the plant and the time the final user takes possession of it, including the transportation, wholesale, and retail costs. The report also contains a measure of domestic producers' raw material costs (RMPI) which can be seen as a very loose leading indicator of the IPPI.

The IPPI reflects the prices that Canadian producers receive when goods leave the factory gate, that is, what producers receive for their output. This index is similar to the United Kingdom's producer output index. The index includes prices for major commodities sold by manufacturers, but it excludes indirect taxes and items such as transportation and wholesale and retail costs. The index is affected by the foreign exchange rate of the Canadian dollar versus the U.S. dollar, and each month its impact is noted. The RMPI reflects the prices paid by Canadian manufacturers for key raw materials, either domestically or in world markets. It is published simultaneously with the IPPI and, like that index, has a base year of 1997 and is subject to revisions for six months. This index is analogous to the producer input price index published in the United Kingdom.

The IPPI and RMPI measure prices at the producer level before they are passed along to consumers. Since these indexes measure prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months.

While the CPI is the price index with the most impact in setting interest rates, the PPI provides significant information earlier in the production process. As a starting point, interest rates have an"inflation premium" and components for risk factors. A lender will want the money paid back from a loan to at least have the same purchasing power as when loaned. The interest rate at a minimum equals the inflation rate to maintain purchasing power and this generally is based on the CPI. Changes in inflation lead to changes in interest rates and, in turn, in equity prices.

The PPI is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or they taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace.