Canadian Industrial Product Price Index Rises 0.4% in September

Led by higher motor vehicle prices, the Industrial Product Price Index (IPPI) for Canada rose for a second consecutive month, increasing 0.4 percent from August to September. The Raw Materials Price Index (RMPI) increased 1.4 percent as a result of higher prices for crude oil.

In September, the IPPI reached its highest level since August 2008. The advance of the index was largely attributable to motor vehicles (+1.3 percent). Petroleum and coal products (+0.7 percent), lumber and other wood products (+1.0 percent) and chemical products (+0.5 percent) also contributed to the increase.

The decline in the value of the Canadian dollar against the US dollar in September contributed significantly to the increase in the IPPI and, in particular, the higher prices of motor vehicles. The value of the Canadian dollar declined 2.0 percent in September relative to the US dollar, following a 2.8 percent decrease in August.

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 had the effect of increasing the corresponding prices in Canadian dollars. Without the impact of the exchange rate, the IPPI would have remained unchanged instead of climbing 0.4 percent.

In September, 3 of the 21 product groups declined, notably meat, fish and dairy products (-0.4 percent) and primary metal products (-0.2 percent).

The largest contributors to the decrease in primary metal products were nickel products (-5.8 percent) and copper products (-1.2 percent). These declines reflected a significant slowdown in industrial activity worldwide, especially in Asia. However, higher prices for gold and gold alloys in primary forms (+3.6 percent) exerted a strong moderating influence on the decline in prices of primary metal products. Excluding petroleum and coal products, the IPPI would have risen 0.5 percent in September, following a 0.7 percent gain in August.

12-month Change
The IPPI was up 5.3 percent in September from the same month a year earlier, which was similar to the average rate of growth since March. Of the 21 major commodity aggregations, 16 were up and 4 declined.

Compared with September 2010, the IPPI was pushed upward mainly by higher prices for petroleum and coal products (+30.2 percent). Also contributing to the advance were primary metal products (+7.8 percent), chemical products (+8.1 percent) and fruit, vegetable and feed products (+6.7 percent). Year over year, petroleum and coal products remained on an upward trend, posting gains since November 2009. September's increase in prices was comparable with the gains recorded between May and August.

The largest contributors to the advance in primary metal products were precious metals, particularly silver and platinum (+74.8 percent), precious metal basic manufactured shapes (+56.6 percent) and gold and gold alloys in primary forms (+35.9 percent).

In September, the 3.0 percent year-over-year increase in the value of the Canadian dollar relative to the US dollar slowed the advance of the IPPI. Without the impact of the exchange rate, the IPPI would have risen 6.0 percent instead of 5.3 percent.

The increase of the IPPI was moderated slightly in September by lower prices for motor vehicles and other transportation equipment (-1.0 percent). Year over year, excluding petroleum and coal, the IPPI would have climbed 2.5 percent in September, comparable to the growth rate in August (+2.4 percent) and continuing the upward trend that began in May 2010.

Raw Materials Price Index
Following four consecutive monthly declines, the RMPI rose 1.4 percent in September, led by higher prices for crude oil (+4.5 percent). The advance of the RMPI was modest compared with the previous declines, and the index remained 9.9 percent below the peak recorded in April 2011.

Mineral fuels rose 4.1 percent in September on the strength of the increase in crude oil. Crude oil prices were very volatile in September, rising in the first half of the month and declining in the second half. The last two weeks of the month were marked by reduced world demand and excess inventory.

The growth in the RMPI in September was moderated by lower prices for animals and animal products (-3.2 percent) and vegetable products (-1.1 percent).

Prices for slaughter hogs fell 16.9 percent, ending a series of nine consecutive monthly increases. In North America, demand contracted sharply and inventories were high. However, demand in Asia moderated the decline in prices.

Excluding mineral fuels, the RMPI would have declined 1.0 percent in September, following a 0.4 percent gain in August.

Compared with the same month a year earlier, the RMPI rose 15.2 percent in September following a 13.3 percent increase in August. The main factors in the year-over-year advance of the RMPI in September were higher prices for mineral fuels (+20.8 percent), non-ferrous metals (+12.3 percent), vegetable products (+22.6 percent) and animals and animal products (+9.6 percent).

Excluding mineral fuels, the year-over-year RMPI would have risen 10.5 percent in September. This marked the third consecutive slowdown in the year-over-year increase of this index since the 19.4 percent gain in June.