Canadian Dollar Declines as Manufacturing Price Gains Subdued

By Jamie McGee

July 30 (Bloomberg) -- Canada's dollar fell after government reports showed that manufacturers' prices rose less than raw-material costs in June, a sign companies aren't passing all of a jump in energy expenses to consumers.

The currency has slumped for seven consecutive days amid concern that falling commodity prices signaled that economic growth was slowing.

``Inflation pressures will remained contained,'' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. ``The Canadian economy will remain very weak for the rest of this year averaging just 1.5 percent growth in the second half.''

The dollar fell 0.3 percent to C$1.0268 per U.S. dollar at 9:15 a.m. in Toronto, from $1.0237 yesterday. One Canadian dollar buys 97.63 U.S. cents. The currency has dropped 2.4 percent so far this year versus its U.S. counterpart.

The raw materials price index rose 4.4 percent, Statistics Canada said today from Ottawa, led by an 8.4 percent gain in fuels such as crude oil. Economists anticipated a 3.5 percent increase, the median of 12 responses. The industrial product price index, which measures what factories charge for goods, rose 1.3 percent, faster than the 1 percent median forecast.

The currency has traded near parity with its U.S. counterpart since September. It touched a 2008 low of C$1.0379 on Jan.22, and a high of 97.12 cents per U.S. dollar on Feb. 28.

The Canadian dollar will weaken to C$1.07 in the first quarter of 2009, according to the median estimate of 29 economists surveyed by Bloomberg News.

To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net.