Canada Industrial Product Price Index Down in September

By MDM Staff

October 29, 2009

More about: Canada, Economy

Raw Materials Price Index also declines.

Canada's Industrial Product Price Index (-0.5%) and the Raw Materials Price Index (-1.1%) were both down in September compared with August, mainly as a result of declining petroleum prices, according to Statistics Canada.

The decrease in the Industrial Product Price Index (IPPI) in September followed a 0.5% advance in August. Since May, the level of the index has been fairly stable in its movement, alternating between upward and downward movements of similar size.

Petroleum and coal prices declined 2.6% after rising 6.2% in August. Of the 21 major product groups, 11 recorded a price decline while 3 increased. With the exception of petroleum and coal, the other product groups contributed only slightly to the movement of the IPPI.

In September, excluding petroleum and coal prices, the IPPI fell 0.3%, continuing its downward trend with a sixth consecutive decline. Among the most significant decreases were fruit, vegetables and feeds (-1.3%) as well as motor vehicles and other transport equipment (-0.4%).

The Canadian dollar rose 0.6% in September in relation to the US dollar. Some Canadian producers who export their products to the U.S. are generally paid in prices set in US dollars. Consequently, the relative weakness of the U.S. dollar in relation to the Canadian dollar had the effect of reducing the corresponding prices in Canadian dollars. If the exchange rate used to convert these prices had remained unchanged, the IPPI would have declined 0.4% instead of 0.5%.

Industrial Product Price Index

Year over year, the IPPI fell 6.1% in September compared with declines of 7.1% in July and 6.7% in August.

The IPPI was pulled down mainly by the prices for petroleum and coal products (-32.1%) and, to a lesser extent, chemical products (-9.7%) and primary metal products (-8.1%). This decline in prices was mainly offset by higher prices for motor vehicles and other transport equipment (+2.3%).

Year over year, prices for products excluding petroleum and coal fell 2.1%, which is comparable to the 2.4% decrease observed in August. The downward trend continues with this fourth consecutive decline.

Since September 2008, the Canadian dollar lost 2.2% of its value against its US counterpart, and if the direct effect of the exchange rate had been excluded, the IPPI would have fallen 6.7% instead of 6.1%.

Raw Materials Price Index

The Raw Materials Price Index (RMPI) fell 1.1% in September, which is a marked change from the 3.8% increase posted in August. The volatile movements of the RMPI are mainly due to fluctuations in prices for mineral fuels, especially crude oil. The price for crude oil fell 1.6% in September, following an 8.1% increase in August.

The 5.1% drop in prices for vegetable products also contributed to the decline in the RMPI. In particular, prices for oilseeds (-14.5%) and grains (-3.2%) fell on forecasts of an abundant crop. The drop in the RMPI was tempered by a 0.7% rise in prices for non-ferrous metals. Excluding mineral fuels, the RMPI declined by 0.6%, following a 0.9% rise in August.

From September 2008 to September 2009, raw material prices fell 21.4%, a smaller decrease than the 26.4% year-over-year decline in August. The drop in raw material prices was attributable to the strong 32% price reduction for mineral fuels and, to a lesser extent, a 15.9% drop in prices for vegetable products. All main product groups registered year-over-year price declines.

More details from Statistics Canada.

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