Canada Industrial Product Price Index Edges Up in July

Canada's Industrial Product Price Index (IPPI) edged up 0.1 percent in July, led mainly by primary metal products, according to Statistics Canada. The Raw Materials Price Index (RMPI) rose 1.8 percent, largely because of higher prices for crude oil.

The IPPI edged up 0.1 percent, following a 0.9 percent drop in June. In July, 12 major product groups were up compared with 7 in June.

In July, the IPPI advance was mainly led by primary metal products (+1.4 percent), while lower petroleum and coal prices (-0.9 percent) had a moderating influence on the overall index.

Other than primary metal products, few products made a significant contribution to the IPPI increase. Among them, motor vehicles and other transportation equipment (+0.3 percent) as well as pulp and paper products (+0.6 percent) posted advances, as a result of the depreciation of the Canadian dollar relative to its American counterpart.

In July, the 0.5 percent decrease in the value of the Canadian dollar against the US dollar had a modest influence on the IPPI gain. Some Canadian producers who export their products to the U.S. are generally paid on the basis of prices set in U.S. dollars. Consequently, the weakness of the Canadian dollar in relation to the American dollar had the effect of increasing the corresponding prices in Canadian dollars. If the exchange rate used to convert these prices had remained at the same level, the IPPI would have been unchanged instead of up 0.1 percent.

Excluding petroleum and coal prices, the IPPI rose 0.3 percent in July compared with a 0.7 percent decline in June.

12-month Change in the IPPI
The IPPI was up 1.0 percent in July compared with the same month a year earlier. The index posted a third consecutive gain, smaller than the increase in May (+1.5 percent) but larger than the one in June (+0.2 percent).

The increase in the IPPI over the past 12 months was led mostly by higher prices for primary metal products (+9.4 percent) and petroleum and coal products (+7.5 percent). To a lesser extent, chemical products (+4.6 percent) as well as pulp and paper products (+2.3 percent) contributed to the advance of the IPPI in July.

The IPPI year-over-year advance was moderated by lower prices for motor vehicles and other transportation equipment (-3.9 percent). This decline was primarily a result of a 7.6 percent appreciation of the Canadian dollar relative to the U.S. dollar. If the direct effect of the exchange rate had been excluded, the IPPI would have risen 2.8 percent instead of 1.0 percent.

Between July 2009 and July 2010, prices for products excluding petroleum and coal increased 0.3 percent, registering its first gain since May 2009.

Raw Materials Price Index
The Raw Materials Price Index (RMPI) increased 1.8 percent following consecutive declines in May (-7.3 percent) and June (-0.2 percent).

In July, higher prices for mineral fuels (+1.8 percent) and, to a lesser extent, non-ferrous metals (+3.6 percent) and vegetable products (+4.1 percent) were the main factors in the RMPI growth.

Prices for almost all major products were up, except for wood products and non-metallic minerals.

Crude oil prices rose 3.0 percent in July following a 2.4 percent increase in June. These consecutive advances were insufficient to bring the index back up to its level prior to May, the month when crude oil prices (-14.2 percent) fell significantly.

Excluding mineral fuels, the RMPI rebounded 1.7 percent following two consecutive monthly declines.

Compared with the same month a year earlier, raw materials prices increased 6.0 percent in July, after remaining unchanged in June. In July, raw material prices were up mainly as a result of higher prices for mineral fuels, which increased 7.9 percent.

The prices of non-ferrous metals (+7.9 percent), ferrous materials (+20.4 percent) as well as animals and animal products (+3.1 percent) contributed, to a lesser extent, to the year-over-year RMPI advance in July.