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In June, the Canadian Industrial Product Index rose 0.7% compared with May, while the Raw Materials Price Index increased 6.2%, according to a report today from Statistics Canada. Both gains were due to a strong increase in petroleum prices.
June's increase in the IPPI followed declines of 1.2% in May and 0.6% in April. The IPPI was pushed up mainly by the prices for petroleum and coal products and, to a lesser extent, primary metal products. Prices for petroleum and coal products rose10.8%, more than twice the 5.2% increase observed in May. However, excluding petroleum and coal products, the IPPI posted a 0.3% decline, slower than the 1.8% drop recorded in May.
Most of the 2.2% increase for primary metal products came from higher prices for nickel products (+19.6%) and copper and copper alloy products (+8%).
The Canadian dollar rose 2.2% in June against the U.S. dollar. Some Canadian producers who export their products to the U.S. are generally paid in prices set in U.S. dollars. Consequently, the relative weakness of the U.S. 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 risen 1.2% instead of 0.7%.
Year over year, the IPPI declined 5.4% in June, exceeding the decreases of 4.5% in May and 2.3% in April. The IPPI was pulled down mainly by the prices for petroleum and coal products (-36.5%), primary metal products (-15.5%) and chemical products (-5.5%). These declines were mainly offset by increases in prices for motor vehicles and other transport equipment (+8.2%).
Year over year, the prices for products excluding petroleum and coal registered a fourth consecutive slowdown, pushing the index down to June 2008 levels. Since June 2008, the Canadian dollar has lost 9.7% of its value against its U.S. counterpart, and if the direct effect of the exchange rate had been excluded, the IPPI would have fallen 8.2% instead of 5.4%.
The RMPI posted a month-over-month increase of 6.2% in June, after rising 2.2% in May. Prices for mineral fuels posted a strong increase of 12.4% in June, after registering a 6.2% gain in May. The increase was mainly due to a 14.4% rise in the price for crude oil. Excluding mineral fuels, the RMPI posted a gain of 0.8%, following a 0.9% decrease the previous month.
Non-ferrous metals rose 5.0% in June compared with May, propelled by strong demand, especially from China, for lead, copper, nickel and zinc concentrates. Year over year, raw material prices fell 30.7%, a decrease of the same magnitude as those registered since December 2008. The drop in raw material prices was attributable to the strong 44.1% price reduction for mineral fuels and, to a lesser extent, to decreases in the prices for non-ferrous metals (-13.6%) and vegetable products (-18.9%).