The 2020 Mid-Year Economic Update_long

Canadian Industrial Product Price Index Down 0.4% in September

Raw Materials Price Index declined 1.8 percent, largely due to lower prices for crude energy products.

The Canadian Industrial Product Price Index (IPPI) decreased 0.4 percent in September, primarily on lower prices for energy and petroleum products. The Raw Materials Price Index (RMPI) declined 1.8 percent, largely as a result of lower prices for crude energy products.

Of the 21 major commodity groups included in the IPPI, 13 were up, seven were down and one was unchanged. The decrease in the IPPI was led by lower prices for energy and petroleum products (-1.7 percent), mainly due to lower prices for motor gasoline (-1.2 percent), light fuel oils (-3 percent) and diesel fuel (-2.2 percent). Diesel fuel has been declining since March 2014. Higher crude oil supplies in North America have exerted downward pressure on prices for refined petroleum products. The IPPI excluding energy and petroleum products edged down 0.1 percent in September.

Also contributing to the decline in the IPPI in September was primary non-ferrous metal products (-1.9 percent), primarily from lower prices for unwrought precious metals and precious metal alloys (-4.9 percent), primarily unwrought silver and silver alloys (-6.9 percent), unwrought gold and gold alloys (-4.3 percent) and other unwrought precious metals and precious metals alloys, including platinum group metals (-4 percent). This was the largest decline in unwrought precious metals and precious metal alloys since the 5.6 percent decline in May 2013.

Moderating the decrease in the IPPI were higher prices for motorized and recreational vehicles (+0.6 percent), mainly due to higher prices for passenger cars and light trucks (+0.7 percent), motor vehicle engines and motor vehicle parts (+0.4 percent) as well as aircraft (+0.9 percent). The increase in the prices of motorized and recreational vehicles was closely linked to the depreciation of the Canadian dollar relative to the US dollar.

Some IPPI prices are reported in U.S. dollars and are converted to Canadian dollars using the average monthly exchange rate. Consequently, any change in the value of the Canadian dollar relative to the U.S. dollar will affect the level of the index. From August to September, the Canadian dollar decreased 0.8 percent relative to the U.S. dollar. If the exchange rate had remained constant, the IPPI would have declined 0.5 percent instead of decreasing 0.4 percent.

The IPPI rose 2.5 percent during the 12-month period ending in September. Compared with September 2013, the advance of the IPPI was mainly attributable to meat, fish, and dairy products (+10.2 percent), specifically fresh and frozen beef and veal (+27.7 percent) and fresh and frozen pork (+19.1 percent).

Year over year, prices for motorized and recreational vehicles were up 4.1 percent, mainly resulting from higher prices for passenger cars and light trucks (+4.1 percent), motor vehicle engines and motor vehicle parts (+3.1 percent) as well as aircraft (+8.1 percent). On a year-over-year basis, prices for motorized and recreational vehicles have been on an upward trend since July 2013.

Chemicals and chemical products (+4.3 percent) also contributed to the year-over-year increase of the IPPI, primarily as a result of higher prices for petrochemicals (+10.9 percent), plastic resins (+8.9 percent) as well as ammonia and chemical fertilizers (+8 percent).

On a year-over-year basis, primary ferrous metal products increased 7.5 percent, reflecting higher prices for iron and steel basic shapes (+10.3 percent) as well as wire and other rolled and drawn steel products (+10.5 percent).

Energy and petroleum products declined 1 percent compared with September 2013. Lower prices for diesel fuel (-4.5 percent), jet fuel (-4.7 percent) and motor gasoline (-0.4 percent) were the main reasons for the decline in this commodity group. Higher prices for asphalt and asphalt products (+6.1 percent) moderated the decrease. This was the first year-over-year decline for energy and petroleum products since May 2013.

Raw Materials Price Index
The RMPI declined 1.8 percent in September, the third consecutive monthly decrease. Of the six major commodity groups, four were down, one was up and one was unchanged.

Crude energy products (-1.9 percent) contributed the most to the decline of the RMPI in September, largely as a result of lower prices for conventional crude oil (-1.8 percent). This was the third straight monthly decline for crude energy products. Abundant supply and slow growth in world oil demand were the main factors exerting downward pressure on crude oil prices. The RMPI excluding crude energy products was down 1.7 percent.

Animals and animal products (-3.4 percent) also contributed significantly to the decline of the RMPI, as a result of lower prices for live animals (-5.2 percent), particularly hogs (-12.3 percent), which posted its largest decrease since September 2012.

Crop products (-2.3 percent) were also down in September, as prices declined for a fourth consecutive month. The decrease in this commodity group was primarily due to lower prices for other crop products (-2.4 percent), mainly oilseeds (except canola), which fell 5.6 percent, following a 3.5 percent decline the previous month.

The RMPI decreased 0.9 percent in the 12-month period ending in September, after declining 0.6 percent in August. Compared with the same period a year earlier, the decrease in the RMPI was mainly attributable to lower prices for crude energy products (-5.4 percent), which posted its largest decline since January 2013. Conventional crude oil (-5.5 percent) was mainly responsible for the decrease in this commodity group. On a year-over-year basis, the RMPI excluding crude energy products was up 4.6 percent.

Compared with September 2013, crop products (-1.6 percent) also contributed to the decline in the RMPI, as a result of lower prices for other crop products (-2.7 percent), canola (-11.6 percent) and wheat (-6.5 percent). The decline of crop products was moderated by higher prices for fresh fruit, nuts and vegetables (+13.4 percent).

The decrease in the RMPI over the 12-month period was moderated primarily by higher prices for animals and animal products (+11.3 percent), which have been rising on a year-over-year basis since April 2013. Prices for live animals (+20.1 percent), particularly cattle and calves (+40.9 percent), were the main source of the increase in this commodity group.

Metal ores, concentrates and scrap were also up compared with September 2013, as prices rose 2.5 percent, following a 1.2 percent increase the previous month.

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