RPT-UPDATE 2-Canada nonconsumer inflation measures jump in Feb

(Repeats to remove extraneous material below graphic pointer)

* Price increases are far higher than expectations

* Industrial product prices up 0.7 pct, boosted by energy

* Raw material prices up 1.8 pct

* Price hikes have yet to show up in consumer price index
(Adds implications for monetary policy, link to a graphic)

By Randall Palmer

OTTAWA, March 30 (Reuters) – Canadian producer prices and
raw material prices rose far faster than expected in February,
but analysts said these price pressures have yet to turn up in
consumer inflation.

Statistics Canada said on Wednesday that industrial product
prices were up 0.7 percent in February from the month before,
more than double the 0.3 percent forecast by analysts surveyed
by Reuters. The rise was led by a 3.0 percent jump in prices
for oil and coal products.

Raw material prices rose by 1.8 percent, more than three
times the 0.5 percent pace forecast by economists. This was
mainly because of price increases for nonferrous metals,
animals and vegetable products.

Scotia Capital economists Derek Holt and Gorica Djeric said
the increase in industrial product prices is not yet showing
itself in consumer prices. “It remains the case that this is at
the expense of margins instead of being passed through to
finished goods prices,” they said.

“That continues to say to us that inflation readings that
matter to the BoC (Bank of Canada) continue to be well
behaved,” they added.

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Graphic on these price rises:

http://r.reuters.com/zer78r

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Consumer price data released on March 18 showed annual
inflation running at 2.2 percent in February, with prices for
the month up 0.3 percent. The central bank’s core index, which
excludes gasoline and some food, rose a paltry 0.9 percent on
the year and 0.2 percent on the month. [ID:nSCLIEE7AG]

The Bank of Canada’s inflation target is 2 percent.

TD Economics specialist Francis Fong said that while it was
apparent that companies were taking a hit on their margins,
they can only do that for so long.

He said food prices have been rising since about last June.
“It typically takes about 12 months for food price increases to
translate into actual food prices rising at grocery stores and
restaurants,” he said.

“We’re expecting that consumer prices will be rising at a
more rapid clip in the coming months.”

The Bank of Canada tries to take action to curb inflation
18 to 24 months before it expects it to have an effect.

TD is still calling for the central bank to raise interest
rates next in July, whereas the market has not priced in a hike
until September. (BOCWATCH: Quote, Profile, Research)

Bank of Canada Governor Mark Carney said on Saturday the
commodity price boom could last for decades. [ID:nN26115578]
(Editing by Kenneth Barry and Peter Galloway)

RPT-UPDATE 2-Canada nonconsumer inflation measures jump in Feb