Canadian Industrial Product Price Index Dips 0.1% in October

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The IPPI edged down in October, following increases of 0.4 percent in August and 0.5 percent in September. The decline in the index was mainly attributable to primary metal products (-4.4 percent).

The decrease in the demand for primary metals was more pronounced in October, particularly for precious metals. Prices were down 16.3 percent for silver and platinum, 12.5 percent for precious metal basic manufactured shapes, and 5.0 percent for gold and gold alloy in primary forms.

All other metal groups except iron and steel products posted substantial declines. Prices for primary copper products (-12.7 percent), primary aluminum products (-3.9 percent) and primary nickel products (-5.8 percent) were particularly sensitive to the global economic slowdown.

The decrease in the IPPI in October was moderated by higher prices for motor vehicles (+1.2 percent), petroleum and coal (+0.6 percent) and pulp and paper products (+0.7 percent).

In October, the decline of the Canadian dollar relative to the US dollar continued for a third straight month. The decrease in the exchange rate (-1.7 percent) led to higher prices, especially for motor vehicles and pulp and paper products.

Some Canadian producers who export their products are generally paid on the basis of prices set in US dollars. Consequently, the weakness of the Canadian dollar in relation to the US dollar in October had the effect of increasing the corresponding prices in Canadian dollars. Without the impact of the exchange rate, the IPPI would have declined 0.5 percent instead of edging down 0.1 percent.

Excluding petroleum and coal prices, the IPPI declined 0.2 percent in October following a 0.6 percent increase in September.

12-month Change
The IPPI rose 4.7 percent in October compared with the same month a year earlier, a slightly lower growth rate than those observed from June to September. Of the 21 major commodity aggregations, 19 were up in October compared with 14 in September.

Relative to October 2010, the IPPI was pushed upward mainly by higher prices for petroleum and coal products (+25.2 percent). Chemical products (+7.5 percent), and fruit, vegetables and feeds (+5.2 percent) also contributed to the advance.

Year over year, petroleum and coal products continued their upward trend, having posted increases since November 2009. The growth of prices in October was slower than in September (+30.2 percent), but remained comparable with the rates observed since March.

Year over year, excluding petroleum and coal prices, the IPPI rose 2.3 percent in October, comparable to the average year-over-year growth rate for the first 10 months of 2011.

Year over year, primary metal products had little impact overall on the growth of the IPPI in October. Increases in precious metals and iron and steel products were almost completely offset by declines in nickel, copper and aluminum products.

Raw Materials Price Index
The RMPI declined 1.2 percent in October after increasing 1.4 percent in September. The index was pulled downward mainly by the prices of non-ferrous metals (-8.8 percent) and vegetable products (-3.5 percent).

Prices decreased in October for all non-ferrous metals except radioactive concentrates, which rose 2.8 percent. The largest contributors were copper and nickel concentrates (-12.0 percent), non-ferrous metal scrap (-13.4 percent), precious metals (-7.9 percent) and zinc concentrates (-9.2 percent).

The declines in vegetable products in October were observed for grains (-2.3 percent), unrefined sugar (-13.0 percent) and natural rubber (-6.8 percent). Increased supply affected the price of corn (-8.1 percent) and unrefined sugar, while the decline in natural rubber prices was attributable to lower demand in Asia.

In October, the decline in the RMPI was moderated by increases in animal products (+3.4 percent) and mineral fuels (+0.7 percent).

Crude oil prices were very volatile in October, resulting in a slight increase of 0.9 percent. Crude oil inventories were down in the United States, and prospects for economic growth were better.

Excluding mineral fuels, the RMPI would have declined 2.9 percent in October following a 1.0 percent decrease in September.

Compared with the same month a year earlier, the RMPI rose 11.3 percent in October, a lower growth rate than in September (+15.1 percent). The main factors in the year-over-year increase were higher prices for mineral fuels (+19.2 percent), animals and animal products (+14.8 percent) and vegetable products (+12.7 percent). Non-ferrous metals (-4.2 percent) moderated the growth of the RMPI, posting their first decline since September 2009.

Year over year, excluding mineral fuels, the RMPI rose 4.7 percent in October. This marked the fourth consecutive decline in the growth rate since the 19.4 percent increase in June.