Canada’s Producer Price Index (PPI) for March increased by 0.5% month-on-month, surpassing the anticipated rise of 0.3%. The previous month’s figure was revised from an initial 0.4% to 0.6%.
Year-on-year, the PPI recorded a growth of 4.7%, down from the previous 4.9%. The Raw Materials Price Index (RMPI) decreased by 1.0% month-on-month, contrasting with a prior increase of 0.3%.
Impact On Oil And Gas
On an annual basis, the RMPI increased by 3.9%, marking a decline from the former 6.6%. The reduction in raw material price pressures is notable and is likely to persist in April due to decreases in oil and natural gas prices.
What we’re seeing from March’s Producer Price Index is a quicker-than-expected rise in the costs that manufacturers are passing on, at least over the short term. The 0.5% monthly increase, exceeding forecasts and revisions showing even sharper gains in February, suggests that producers may be finding reasons—or are under pressure—to adjust prices upward more frequently. That doesn’t necessarily reflect broader demand strength yet. However, from our vantage point, it does indicate at least some resilience in domestic pricing power, or supply-side tightness that shouldn’t be ignored.
At the same time, the annual figure stepping down from 4.9% to 4.7% tells us that longer-term trends are softening. A decelerating pace here could feed through to downstream pricing in months to come. That is, if the current conditions hold and input costs don’t reverse. This softening may reflect improved supply chains or a stabilising demand backdrop after volatile quarters.
Raw Materials And Energy Complex
What stands out is the behaviour of raw materials. A 1.0% drop month-on-month shows pressure easing quickly at an earlier stage of the production process. If we trace that back, it’s aligned with what we’re seeing in the energy complex—particularly the retreat in oil and gas. These are heavyweights in the RMPI, and any slide here can ripple into various industrial sectors, reducing cost burdens.
The yearly rate for RMPI, now at 3.9%, slipping from 6.6%, reinforces this trend. Taken together, there’s a clearer narrative of input relief that isn’t yet fully filtering into prices further down the supply chain. There’s usually some delay. What we need to monitor closely in the coming weeks is whether this easing persists and how it intersects with buying activity from manufacturers and retailers who’ve previously built up stock at higher costs.
For those who are positioning in derivatives linked to these macro trends, the path of raw materials warrants adjusting models around price pass-through lags and volatility packaging. Producer costs are appearing more volatile over short periods, yet not necessarily accelerating over long arcs. That balance matters for constructing trades sensitive to term structure or skew in inflation expectations. The dislocation between short-term upticks and broader deceleration might create interesting spread or curve opportunities.
We should expect continued divergence between upstream and midstream indicators, especially while external energy markets remain unpredictable. Watching these pass-through dynamics with fresh data each month will matter more than modelling inertia. The market’s reactions to these price signals can be more abrupt when they don’t conform to trend logic, so adapting risk quickly remains a useful principle. Delay too long, and the skew moves.
