The 2020 Mid-Year Economic Update_long

Canadian Industrial Product Price Index Down 0.3% in July

Raw Materials Price Index declined 1.4 percent.

The Canadian industrial product price index declined 0.3 percent in July, mainly because of lower prices for energy and petroleum products. The raw materials price index declined 1.4 percent, largely as a result of lower prices for crude energy products.

IPPI Monthly Change

The IPPI declined 0.3 percent in July, after increasing 0.1 percent in June. Of the 21 major commodity groups, 8 were up, 8 were down and 5 were unchanged.

The decline in the IPPI was led by lower prices for energy and petroleum products (-2.4 percent). Prices for motor gasoline (-4 percent), diesel fuel (-3.4 percent) and light fuel oils (-2.7 percent) were the main reasons for the decrease in this commodity group. High crude oil inventories in North America had the effect of lowering prices for refined petroleum. The IPPI excluding energy and petroleum products increased 0.2 percent in July.

Moderating the decline in the IPPI were higher prices for meat, fish and dairy products (+2.2 percent). Fresh and frozen pork (+5.5 percent) as well as fresh and frozen beef and veal (+5.7 percent) were the main reasons for the increase in this commodity group. Prices paid by processors for hogs and cattle contributed to higher prices for fresh and frozen pork and beef.

Primary non-ferrous metal products (+1.6 percent) increased for the first time since March 2014, also moderating the decline in the IPPI. Higher prices for unwrought precious metals and precious metal alloys (+2 percent), unwrought copper and copper alloys (+3.3 percent) as well as unwrought aluminum and aluminum alloys (+2.5 percent) were the main contributors to the increase in this commodity group.

Fruit, vegetables, feed and other food products declined 1.1 percent in July, mainly as a result of lower prices for intermediate food products (-2.8 percent) and animal feed (-2.8 percent).

Motorized and recreational vehicles (-0.5 percent) also declined, primarily as a result of passenger cars and light trucks (-0.6 percent) as well as motor vehicle engines and engine parts (-0.3 percent). The decrease in the prices of motorized and recreational vehicles was closely linked to the appreciation of the Canadian dollar relative to the US dollar.

Some Canadian producers who export their products report their prices in US dollars. Consequently, the 0.9 percent increase in the value of the Canadian dollar relative to the US dollar may have had the effect of lowering the IPPI. Without the measurable effect of the exchange rate, the IPPI would have declined 0.1 percent instead of decreasing 0.3 percent.

IPPI 12-Month Change

The IPPI rose 2.9 percent during the 12-month period ending in July, after posting a 3.1 percent gain in June.

Compared with July 2013, the advance of the IPPI was mainly attributable to meat, fish, and dairy products (+9.3 percent), specifically fresh and frozen pork (+24.9 percent) as well as fresh and frozen beef and veal (+19.4 percent).

Year-over-year prices for chemical and chemical products were up 6 percent, mainly resulting from higher prices for petrochemicals (+15 percent), ammonia and chemical fertilizers (+20.9 percent) and plastic resins (+10.3 percent). On a year-over-year basis, prices for chemicals and chemical products have been on an upward trend since July 2013.

Primary non-ferrous metal products (+6.7 percent) also contributed to the year-over-year increase of the IPPI, primarily because of higher prices for unwrought precious metals and precious metal alloys (+6.7 percent).

On a year-over-year basis, motorized and recreational vehicles increased 2.6 percent, as a result of higher prices for passenger cars and light trucks (+2.3 percent) as well as motor vehicle engines and motor vehicle parts (+2.4 percent).

Energy and petroleum products have increased 1.8 percent since July 2013, as a result of higher prices for light fuel oils (+3.9 percent), heavy fuel oils (+3.2 percent) as well as lubricants and other petroleum refinery products (+6.2 percent).

RMPI Monthly Change

The RMPI declined 1.4 percent in July, after posting a 1.1 percent increase in June. The July decrease in the index was the second in eight months. Of the six major commodity groups, four were down and two were up.

The decrease in the index was mainly due to lower prices for crude energy products (-4.4 percent), more specifically conventional crude oil (-4.5 percent). It was the largest decline for crude energy products since November 2013. The decrease in crude oil prices was partly the result of high inventories in North America and diminishing concerns regarding supply from certain oil-producing countries. The RMPI excluding crude energy products rose 1.9 percent in July.

Crop products (-1.4 percent) also exerted downward pressure on the RMPI, mostly because of lower prices for other crop products (-1 percent), wheat (-3.4 percent) and canola (-2.8 percent).

The decrease in the RMPI was moderated largely by higher prices for animals and animal products (+3.7 percent). Live animals (+5.7 percent), particularly hogs (+8.9 percent) and cattle and calves (+5.1 percent) contributed to the increase of this commodity group.

The decline of the RMPI in July was also moderated by metal ores, concentrates and scrap, as prices rose 2.5 percent, after falling 1.2 percent the previous month.

RMPI 12-Month Change

The RMPI increased 2.2 percent during the 12-month period ending in July, after posting a 9.1 percent gain in June.

Compared with the same month a year earlier, the rise of the RMPI was mainly due to higher prices for animals and animal products (+13.6 percent), which have been increasing on a year-over-year basis since April 2013. Live animals (+22.4 percent), particularly hogs (+28.8 percent) and cattle and calves (+28.6 percent), were mainly responsible for the increase in this commodity group.

To a lesser extent, prices for metal ores, concentrates and scrap (+4 percent) also exerted upward pressure on the RMPI on a year-over-year basis, after being unchanged in June.

The advance of the RMPI over the 12-month period was moderated mainly by crop products (-6.3 percent). Other crop products (-8.3 percent), wheat (-12.4 percent) and canola (-14.9 percent) were responsible for the decline in crop products.

Compared with July 2013, the rise of the RMPI was also moderated by crude energy products (-0.2 percent), as a result of lower prices for conventional crude oil (-0.5 percent). Crude energy products were down for the first time since April 2013 on a year-over-year basis.

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