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Home » Canada Industrial Product Price Index Rises

Canada Industrial Product Price Index Rises

By    MDM  Staff 
October 1, 2009
More about:  Canada,  Economic Trends
Growing petroleum and metal prices drive the increase in the Canadian index.
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In August, the Canadian Industrial Product Price Index (IPPI) rose 0.5% and the Raw Materials Price Index (RMPI) was up 3.7% compared with July, mainly as a result of rising petroleum and metal prices, according to Statistics Canada.

The August increase in the IPPI followed a 0.6% decline in July. Since May, the level of the index has remained fairly stable, alternating between upward and downward movements of similar size.
 
The IPPI was pushed up by a 6.2% increase in petroleum and coal prices and a 4.9% rise in prices for primary metal products. Of the 21 major product groups, 4 registered an increase in prices while 13 declined. Primary metal products rose sharply, especially nickel products (+19.4%), copper and copper alloy products (+12.2%) and aluminum products (+6.6%).
 
Excluding petroleum and coal prices the IPPI edged down 0.1% in August, a fifth consecutive monthly decline. Increases in the prices for non-ferrous metal products were offset primarily by a decrease in prices for motor vehicles and other transport equipment.
 
The Canadian dollar rose 3.1% in August in relation to the U.S. 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 risen 1.3% instead of 0.5%.
 
12-Month Change
Year-over-year, the IPPI declined 6.7% in August. While this decrease was slightly less than the 7.1% drop observed in July, it was relatively strong in comparison to the six consecutive declines in recent months.
 
The IPPI was pulled down mainly by the prices for petroleum and coal products (-33.4%) and, to a lesser extent, primary metal products (-11.5%) and chemical products (-10.3%). This decline in prices was mainly offset by an increase in prices for motor vehicles and other transport equipment (+3%).
 
Year over year, the prices for products excluding petroleum and coal declined 2.4%, representing a third consecutive decrease and a strengthening of the downward trend. Since August 2008, the Canadian dollar lost 3.1% of its value against its US counterpart, and if the direct effect of the exchange rate had been excluded, the IPPI would have fallen 7.5% instead of 6.7%.
 
Raw Materials Price Index
The RMPI increased 3.7% in August compared with a month earlier, which is of the same magnitude as the 3.9% decline recorded in July. Prices for mineral fuels rose 6.9%, after falling 6.8% in July. The increase in mineral fuels came mainly from the 8.1% rise in prices for crude oil. The 6.3% increase in prices for non-ferrous metals also contributed to the rise in the RMPI, led by zinc concentrates (+16.7%) and copper and nickel concentrates (+16%). Excluding mineral fuels, the RMPI increased 0.8% following a 1.3% decline in July.
 
From August 2008 to August 2009, raw material prices fell 26.4%, a lesser decline than the 34.5% year over year drop recorded in July. The decrease in raw material prices was attributable to the strong 38.5% price reduction for mineral fuels and, to a lesser extent, to decreases in the prices for vegetable products (-18.8%) and ferrous materials (-29.2%). All of the other major product groups also registered year-over-year price declines.
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