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Canadian Industrial Product Price Index Falls in June

The Canadian Industrial Product Price Index (IPPI) fell 0.9 percent in June, led by petroleum and metals. The Raw Materials Price Index (RMPI) declined 0.3 percent, largely because of lower prices for non-ferrous metals and animals and animal products.

The downturn in the IPPI came after two consecutive monthly advances. Among the IPPI product groups, nine were down, seven were up, and the remainder were unchanged.

In June, the IPPI decrease was mainly driven by lower prices for petroleum and coal products (-2.3 percent), primary metal products (-2.9 percent) and, to a lesser extent, by chemical products (-1.7 percent) and lumber and other wood products (-2.3 percent).

The 0.2 percent increase in the value of the Canadian dollar relative to the US dollar had a moderate effect on the IPPI decline. Some Canadian producers who export their products to the United States are generally paid on the basis of prices set in US dollars. Consequently, the strength of the Canadian dollar in relation to the US 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 fallen 0.8 percent instead of 0.9 percent.

Excluding petroleum and coal prices, the IPPI decreased 0.6 percent, after moving in the opposite direction in the previous two months. The Index has been fairly stable since June 2009.

12-month change
The IPPI was up 0.2 percent in June compared with the same month a year earlier. It was the second year-over-year increase following more than a year of consecutive declines.

The increase in the IPPI over the past 12 months was largely led by higher prices for primary metal products (+8.4 percent). There were smaller advances in petroleum and coal products (+2.7 percent), chemical products (+2.8 percent) and lumber and other wood products (+2.7 percent).

The IPPI year-over-year advance was moderated by a decrease in prices for motor vehicles and other transportation equipment (-4.4 percent). This decline was primarily due to an 8.5 percent increase in the value of the Canadian dollar relative to the US dollar. If the direct affect of the exchange rate had been excluded, the IPPI would have risen 2.2 percent instead of 0.2 percent.

Between June 2009 and June 2010, prices for products excluding petroleum and coal edged down 0.1 percent, the same rate of decline as in May. The index for this product group has been falling successively on a year-over-year basis since June 2009.

Raw Materials Price Index
The Raw Materials Price Index (RMPI) was down 0.3 percent in June following a 7.3 percent drop in May. It was the second consecutive monthly decrease after four successive gains.

In June, the decline in the RMPI was mainly a result of lower prices for non-ferrous metals (-6.7 percent) and, to a lesser degree, animals and animal products (-2.2 percent).

The downward movement in raw materials prices was moderated primarily by a 2.0 percent increase in mineral fuels prices. Crude oil prices rose 2.4 percent after falling 14.2 percent in May. Excluding mineral fuels, the RMPI fell 2.4 percent in June following a 1.6 percent decrease in May.

Between June 2009 and June 2010, raw materials prices edged down 0.1 percent, their first decline after seven consecutive increases starting in November 2009. In June, mineral fuels prices were down 1.3 percent year-over-year, while prices for vegetable products dropped 9.5 percent.

Higher prices for ferrous materials (+18.6 percent), non-ferrous metals (+3.5 percent) and animals and animal products (+2.8 percent) moderated the RMPI year-over-year decrease.

Source: Statistics Canada

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