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Canadian Industrial Product Price Index Down in December

Prices for products sold by Canadian manufacturers, as measured by the Industrial Product Price Index (IPPI), fell 0.7 percent in December, mainly due to lower prices for energy and petroleum products, according to new data from Statistics Canada.Prices for raw materials purchased by Canadian manufacturers, as measured by the Raw Materials Price Index, rose 3.8 percent, driven primarily by prices for crude energy products.

Of the 21 major commodity groups, 3 were down, 14 were up and 4 were unchanged.

The decline in the IPPI was mainly due to lower prices for energy and petroleum products, which fell 7.4 percent, following a 6.8 percent decrease in November. This was the largest decline for this commodity group since January 2016 (-7.5 percent). Prices for nearly all energy and petroleum products were down in December, notably motor gasoline (-7.4 percent), light fuel oils (-9.6 percent) and diesel fuel (-8.5 percent). The IPPI excluding energy and petroleum products rose 0.4 percent.

Chemicals and chemical products (-1.5 percent) also contributed to the decline in the IPPI, but to a lesser extent. Petrochemicals (-8.8 percent), particularly liquefied refinery gases, and acyclic hydrocarbons not elsewhere classified (-12.5 percent) and aromatic hydrocarbon gases (-10.9 percent) were primarily responsible for this decrease.

On the other hand, the decrease in the IPPI was moderated primarily by higher prices for motorized and recreational vehicles (+0.8 percent) and primary non-ferrous metal products (+1.6 percent).

Prices for motor vehicle engines and motor vehicle parts (+1 percent), aircraft (+2 percent), as well as aircraft engines, aircraft parts and other aerospace equipment (+1.9 percent), were mainly responsible for the increase in motorized and recreational vehicles. Higher prices for motorized and recreational vehicles were closely linked to the depreciation of the Canadian dollar relative to the US dollar.

The increase in primary non-ferrous metal products mostly reflected higher prices for unwrought precious metals and precious metal alloys (+2.5 percent). Prices for unwrought aluminum and aluminum alloys (+3.5 percent), which rose for the first time since May 2018, also contributed to the gain in this commodity group.

Electrical, electronic, audiovisual and telecommunication products (+0.9 percent) rose for the third consecutive month, led by higher prices for electronic and electrical parts (+2.1 percent) and communication and audio and video equipment (+0.6 percent).

Some IPPI prices are reported in US dollars and converted to Canadian dollars using the average monthly exchange rate. Consequently, any change in the value of the Canadian dollar relative to the US dollar will affect the level of the index. From November to December, the Canadian dollar depreciated 1.8 percent relative to the US dollar. If the exchange rate had remained constant, the IPPI would have decreased 1.1 percent instead of 0.7 percent.

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