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Industrial Product and Raw Material Price Indexes: July 2009

August 28, 2009

The Industrial Product Price Index (IPPI) and the Raw Materials Price Index (RMPI) declined 0.5% and 3.8% respectively in July compared with June, mainly due to falling petroleum prices.

July's decrease in the IPPI followed an increase of 0.5% in June. The index registered its lowest level in the past 18 months. Furthermore, it was down 7.0% from the peak reached in August 2008.

The IPPI was pulled down to a large extent by the 5.2% reduction in petroleum and coal prices. The decline in petroleum and coal prices in July followed three consecutive monthly increases, including a substantial 10.8% gain in June.

In July, excluding petroleum and coal prices, the IPPI remained unchanged after declining for three consecutive months. The decreases observed for fruit, vegetables and feed products and for motor vehicles and other transport equipment were offset by increases in other groups, led by lumber and other wood products as well as primary metal products.

The Canadian dollar edged up 0.4% in July in relation to the US dollar. Some Canadian producers who export their products to the United States are generally paid in prices set in US dollars. Consequently, the relative weakness of the US 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 declined 0.4% instead of 0.5%.

12-month change: Fifth consecutive decline in the Industrial Product Price Index
Year over year, the IPPI declined 6.9% in July, strengthening the downward trend for a fifth consecutive month.

The IPPI was pulled down mainly by the prices for petroleum and coal products (-41.1%) and primary metal products (-17.7%). This decline in prices was mainly tempered by higher prices for motor vehicles and other transport equipment (+7.9%).

Year over year, the prices for products excluding petroleum and coal fell 1.1% in July following a 0.3% drop in June. Since July 2008, the Canadian dollar has lost 9.8% of its value against its US counterpart, and if the direct effect of the exchange rate had been excluded, the IPPI would have fallen 9.7% instead of 6.9%.

Raw Materials Price Index: Index pulled down by lower prices for crude oil
The RMPI fell 3.8% in July, in contrast with increases of 2.2% in May and 6.2% in June.

Prices for mineral fuels fell 6.8% in July, following two consecutive monthly increases, including a 12.4% rise in June. The drop in mineral fuels was mainly due to the 7.2% decrease in the price for crude oil. Excluding mineral fuels, the RMPI declined 0.8%, after rising 0.7% in June.

From July 2008 to July 2009, raw material prices dropped 34.4%, the largest year-over-year decline since 1977, the first year for which this index was calculated. The decrease in raw material prices was attributable to the strong 49.0% price reduction for mineral fuels and, to a lesser extent, to the declines for non-ferrous metals (-15.0%) and vegetable products (-19.8%).

More details at Statistics Canada

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