Canada Industrial product and raw materials price indexes – September 2006

Prices for manufactured goods at the factory gate declined in September for the second month in a row, mainly due to lower prices for petroleum products. Raw materials prices also decreased in September, as prices for crude oil continued to fall.

Prices charged by manufacturers, as measured by the Industrial Product Price Index (IPPI), were down 1.6% in September, following a 0.5% drop in August. Lower prices for petroleum products were the major contributors to this monthly decrease.

The 12-month change in the IPPI was up 1.3%, a lower rate of growth compared to the year-over-year increase of 3.6% in August. Upward pressure came mainly from higher prices for primary metal products.

The Raw Materials Price Index (RMPI) was down 5.2% from August to September, following a 3.7% decline the previous month. The decrease was due primarily to lower prices for crude oil.

Compared to September 2005, raw materials cost factories 4.0% more, down significantly from the year-over-year change of 9.6% in August.

The IPPI stood at 113.4 (1997=100) in September, down from 115.2 in August. The RMPI reached 160.0 (1997=100), down from a revised level of 168.7 in August.

IPPI: Lower prices for petroleum products
On a month-over-month basis, manufacturers' prices were down 1.6%, mainly due to lower prices for petroleum products.

Petroleum and coal products prices decreased by 13.8%, as the cost for crude oil declined for a second month. This was the largest monthly decline since the 13.6% drop in April 2003. If petroleum and coal product prices had been excluded, the IPPI would have remained unchanged rather than falling 1.6%.

Prices for primary metal products fell 1.0% compared to August, the third decline in four months. Prices for copper and copper alloy products were down by 6.4%, due to lower costs for input materials. Lower prices were also observed for silver, refined gold products as well as aluminum products.

On the other hand, prices for meat, fish and dairy products (+0.9%) as well as pulp and paper products (+0.3%) were higher compared to the previous month.

IPPI: Primary metal products are the major contributors to the 12-month change
The IPPI was up 1.3% in September compared with the same month a year earlier, a significant change from the previous five months, where the year-over-year increases ranged between 2.2% and 4.5%. The slowdown in the increase was mainly due to the prices of petroleum products. Indeed, if petroleum and coal product prices had been excluded, the IPPI would have increased 2.9%.

Prices for primary metal products were up 28.5% compared to September 2005. Prices for nickel products (+86.0%), copper products (+77.0%), refined zinc products (+127.4%) and aluminum products (+14.9%) were all higher compared with one year earlier.

Prices were also higher than one year ago for pulp and paper products, rubber, leather and plastic fabricated products, metal fabricated products, meat, fish and dairy products, non-metallic mineral products and tobacco products.

However, prices for petroleum and coal products fell 11.3% from September 2005, the first year-over-year decrease since March 2004.

Motor vehicles and other transport equipment prices were down 3.5% from a year ago, due to the effect of a stronger Canadian dollar.

Lumber and other wood products declined 6.3% compared to September 2005, as year-over-year decreases were recorded for softwood lumber (-6.2%) and particleboard (-41.9%). Prices were also lower than a year ago for machinery and equipment.

RMPI: Crude oil prices push down the cost of raw materials
Raw materials prices fell 5.2% in September, following a 3.7% decline in August. This was the largest monthly decrease since November 2004.

Mineral fuels were the major contributor to this monthly drop, with prices declining 9.9% compared to August. Prices for crude oil were down 11.6%, mainly due to higher inventories as well as softening demand. If mineral fuels had been excluded, the RMPI would have been unchanged from August instead of falling 5.2%.

Ferrous materials prices were down 3.6%, as prices for iron and steel scrap decreased 5.7%. Prices for vegetable products declined 1.6% from the previous month, as prices for natural rubber fell 18.4% due to increased production.

On the other hand, prices for wood and animal and animal products increased 1.0% and 0.4% respectively from August to September, while prices for non-metallic minerals remained unchanged.

On a 12-month basis, the price of raw materials rose 4.0% in September, down significantly from the 9.6% year-over-year increase in August, and the lowest rate of growth since March 2006, when prices had increased 5.5% from the previous year. If mineral fuels had been excluded, the RMPI would have increased 20.3% instead of rising 4.0%.

Non-ferrous metals were the major contributors to the 12-month increase, with prices rising 71.2%, mainly the result of year-over-year price increases for zinc, radio-active concentrates, copper, lead and nickel.

Prices were also higher than one year ago for wood, vegetable products as well as non-metallic minerals.

Mineral fuels were down 8.6%, with crude oil prices falling 9.5%. This was the first negative year-over-year change since March 2004. Prices for ferrous materials were also down from a year ago.

The value of the Canadian dollar against the US dollar was up 0.2% between August and September. As a result, the total IPPI excluding the effect of the exchange would have fallen 1.5% instead of its actual decrease of 1.6%.

On a 12-month basis, the value of the Canadian dollar rose 5.5% against the US dollar. If the impact of the exchange rate had been excluded, producer prices would have risen 2.8% between September 2005 and September 2006, rather than their actual increase of 1.3%.

Lower prices for intermediate goods
Prices for intermediate goods decreased 1.5% from August. Lower prices for petroleum products, primary metal products as well as chemical products were the major contributors to this monthly drop.

These decreases were partly offset by higher prices for meat, fish and dairy products, pulp and paper products and fruit, vegetable and feed products.

Producers of intermediate goods received 4.0% more for their goods in September than in September 2005. Higher prices were registered for primary metal products, pulp and paper products, rubber, leather and plastic fabricated products, metal fabricated products, non-metallic mineral products, electrical and communication products and meat, fish and dairy products.

These increases were partly offset by lower prices for petroleum products, lumber products, motor vehicles and tobacco products.

Finished goods prices decrease
Prices for finished goods were down 1.6% from August. Lower prices for petroleum products were partially offset by higher prices for lumber products, pulp and paper products, meat, fish and dairy products and chemical products.

Compared with September 2005, prices for finished goods declined by 2.6%. Lower prices were registered for petroleum products, motor vehicles, machinery and equipment and electrical and communication products.

These decreases were partly offset by higher prices for fruit, vegetable and feed products, meat, fish and dairy products, tobacco products, chemical products, furniture and fixtures, beverages, rubber, leather and plastic fabricated products as well as lumber products.

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