The 2020 Mid-Year Economic Update_long

Canadian Industrial Product Price Index Down 0.4 percent in January

Raw Materials Price Index declined 7.7 percent, largely due to lower prices for crude energy products.

The Canadian Industrial Product Price Index (IPPI) decreased 0.4 percent in January, largely as a result of lower prices for energy and petroleum products. The Raw Materials Price Index (RMPI) declined 7.7 percent in January, largely as a result of lower prices for crude energy products. The IPPI (-0.4 percent) declined for the fifth straight month in January, after decreasing 1.5 percent in December. Of the 21 major commodity groups, 18 groups were up, 2 were down and one was unchanged.

Energy and petroleum products fell 11.2 percent in Januaryand have decreased 30 percent since June 2014. The drop in January was again led by lower prices for motor gasoline (-12.2 percent) and, to a lesser extent, diesel fuel (-11.9 percent), light fuel oils (-10 percent) and heavy fuel oils (-15.8 percent). Lower prices for petroleum products reflected rising supply of North American oil as well as the decision by the Organization of Petroleum Exporting Countries to maintain market share by not cutting production. The IPPI excluding energy and petroleum products increased 1.5 percent.

Also contributing to the decline in the IPPI, but to a lesser extent, were lower prices for chemicals and chemical products (-1.6 percent). The main reason for the decline in this commodity group was petrochemicals (-14 percent), specifically aromatic hydrocarbon gases (-16.4 percent) as well as liquefied refinery gases, and acyclic hydrocarbons not elsewhere classified (-19 percent). Slightly moderating the decline in chemicals and chemical products were higher prices for ammonia and chemical fertilizers (+7.3 percent).

Of the 18 commodity groups that posted increases in January, motorized and recreational vehicles (+3.5 percent) had the largest moderating effect on the IPPI decline. The increase in prices was mainly due to passenger cars and light trucks (+3.8 percent), motor vehicle engines and motor vehicle parts (+2.4 percent) as well as aircraft (+5.6 percent). Higher prices for motorized and recreational vehicles were closely linked to the depreciation of the Canadian dollar relative to the US dollar.

Also moderating the decline in the IPPI were higher prices for primary non-ferrous metal products (+4.6 percent). The increase was led by higher prices for unwrought gold and gold alloys (+10.2 percent) as well as unwrought silver and silver alloys (+12.9 percent).

Some IPPI prices are reported in US 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 US dollar will affect the level of the index. From December 2014 to January 2015, the Canadian dollar depreciated 5.1 percent relative to the US dollar, which was the largest depreciation since October 2008. If the exchange rate had remained constant, the IPPI would have declined 1.5 percent instead of decreasing 0.4 percent.

The IPPI decreased 2.2 percent over the 12-month period ending in January, after decreasing 0.4 percent in December.

Compared with the same month in 2014, the decrease of the IPPI was mainly attributable to energy and petroleum products (-29.2 percent), primarily as a result of lower motor gasoline prices (-32.4 percent), which have been dropping year over year since July 2014. Diesel fuel (-29.7 percent), light fuel oils (-28.6 percent) and heavy fuel oils (-39.3 percent) also contributed significantly to the decrease in energy petroleum products. The IPPI excluding energy and petroleum products rose 3.4 percent year over year.

To a lesser extent, chemicals and chemical products (-6.4 percent) also contributed to the year-over-year decrease of the IPPI. Lower prices for petrochemicals products (-32.8 percent), specifically aromatic hydrocarbon gases (-44.5 percent), were the main reason for the decline in this commodity group.

The 12-month decline of the IPPI was moderated mainly by prices for motorized and recreational vehicles (+7.6 percent), essentially passenger cars and light trucks (+7.5 percent), motor vehicle engines and motor vehicle parts (+6.4 percent) as well as aircraft (+12.6 percent).

Compared with the same month a year earlier, the decline of the IPPI was also moderated by the meat, fish and dairy products group (+11.1 percent). Higher prices for fresh and frozen beef and veal (+27.7 percent) and fresh and frozen pork (+21.6 percent) contributed the most to the increase in this commodity group.

Raw Materials Price Index

The RMPI (-7.7 percent) fell for the seventh consecutive month in January, after declining 7.5 percent in December. Of the six major commodity groups, four were up and two were down.

The decline in the RMPI was primarily due to lower prices for crude energy products (-19.1 percent), specifically conventional crude oil (-20.1 percent), which fell for the seventh consecutive month and has decreased 51.2 percent since June 2014. The lower price of crude oil reflected a global surplus in the supply of crude oil. The RMPI excluding crude energy products increased 0.5 percent. Slightly moderating the decline in the RMPI were higher prices for metal ores, concentrates and scrap (+1 percent).

The RMPI declined 21.8 percent over the 12-month period ending in January, after falling 13 percent in December. Compared with the same period in 2014, the decrease in the RMPI was mainly attributable to a 45 percent decrease in the price of crude energy products. Conventional crude oil (-46.2 percent) was the main reason for the decrease in this commodity group. The RMPI excluding crude energy products increased 4 percent in January. To a lesser extent, metal ores, concentrates and scrap also put downward pressure on the RMPI year over year, with prices falling 2.2 percent following a 0.8 percent decline in December.

The 12-month decline of the RMPI was primarily moderated by animals and animal products (+11.2 percent), which have been on an upward trend since April 2013. Live animals (+18.8 percent), specifically cattle and calves (+40 percent), were the main contributor to the increase in this commodity group.

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