Higher Energy Costs Push Price Spike For Canadian Manufacturers - Canadian Press

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OTTAWA - Factory prices and the cost of raw materials surged in November as the high cost of oil showed signs of filtering through to the general economy.

Statistics Canada reported Friday that prices charged by manufacturers for their goods rose 0.6 per cent in November after six straight monthly declines. Meanwhile, raw material costs jumped 3.4 per cent, boosted by steep increases in oil and coal prices which have only accelerated in recent weeks.

On a 12-month basis, the industrial products index actually was down 0.6 per cent from November 2006, whereas the raw materials price index rose 15.7 per cent.

With oil hitting US$100 a barrel this week, economists say the November surge could be a signal that inflation may erupt and stay the Bank of Canada's hand on future interest rate cuts. "It's certainly something the bank has to take into consideration," said BMO Capital Markets economist Kenrick Jordan. "If oil prices remain high for a sustained period, of course it would put upward pressure on core inflation."

Some industry analysts are forecasting oil could remain at record levels for the near future and push gasoline pump prices into the $1.25 to $1.50 a litre range this summer, when gas prices traditionally rise.

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