Increasing raw material costs hurting Canadian manufacturers: CME

Canadian Manufacturers & Exporters (CME) recently shared an infographic highlighting how high raw material costs are impacting Canadian manufacturers.

Bank of Canada’s recent rate hikes were aimed at correcting high inflation rates and increasing prices. Costs of key raw materials such as crude oil, natural gas, wheat and forestry products are soaring.

CME shared that the raw materials price index for May was up 37.4 percent from a year ago and has risen by two-thirds since January 2020.

The latest S&P Global Canada’s Manufacturing Purchasing Managers’ Index (PMI) was down in June from May (56.8), registering at 54.6.

CME explained in its statement that besides the high costs, manufacturers were facing other challenges such as supply chain bottlenecks, labour and skill shortages and heightened global uncertainty. These challenges together are weighing on margins, leaving manufacturers with no choice but to pass on some of the additional costs to consumers. This is one of the factors driving high consumer price inflation in Canada, said CME.

“Canadian manufacturers are feeling the pain from these rapidly increasing costs and are ready to do their part in the fight against inflation. But this will take concrete steps from governments to help the industry get the workers it needs, improve the environment for business investment, and accelerate spending on critical infrastructure,” said Dennis Darby, CME president and CEO.

He added, “We want to strengthen our sector and see it grow so it can continue to drive our economy, improve prosperity, and build long-term resilience against future shocks.”

Higher interest rates curb inflation by reducing demand for goods and services and slowing the economy down. CME says that in tandem with the Bank of Canada’s actions, policymakers must do all they can to build a more productive economy with a greater capacity to deliver goods and services to Canadians. Increasing the supply-side of the economy is not only fundamental to growth, but it also helps create a more inflation-resistant economy.