The 2020 Mid-Year Economic Update_long

Canadian Industrial Product Price Index Increases in June

Raw materials price index grew 1.8 percent, led by higher prices for crude energy products.

Canada's industrial product price index increased 0.6 percent in June, according to Statistics Canada. The increase was mainly due to higher prices for energy and petroleum products. The Raw Materials Price Index (RMPI) increased 1.8 percent, as a result of higher prices for crude energy products.

The IPPI advanced 0.6 percent in June, after gaining 1.2 percent in May. Of the 21 major commodity groups, 14 were up, 4 were down and 3 were unchanged.

Energy and petroleum products (+3.9 percent) posted gains for a fourth consecutive month and were the largest contributor to the increase in the IPPI. Higher prices for motor gasoline (+2.6 percent), light fuel oils (+6.5 percent) and diesel fuel (+5.4 percent) were the main reasons for the advance in energy and petroleum products. The IPPI excluding energy and petroleum products rose 0.3 percent in June.

Also contributing to the increase in the IPPI were meat, fish, and dairy products (+1.5 percent), led by higher prices for fresh and frozen pork (+6.2 percent). Prices for fresh and frozen beef and veal edged up 0.2 percent in June; however, these prices were down 13.8 percent from the same month last year. Prices for fresh and frozen pork were up 10.2 percent from June 2015.

Fruit, vegetables, feed and other food products (+1.2 percent) rose for a second straight month, posting their largest gain since an identical increase in July 2015. The rise in this commodity group was led by higher prices for grain and oilseed products not elsewhere classified (+5.4 percent) and other animal feed (+4.1 percent).

Moderating the June increase in the IPPI were lower prices for chemicals and chemical products (-0.9 percent), primarily led by ammonia and chemical fertilizers (-10.6 percent).

Motorized and recreational vehicles edged down 0.1 percent in June, led by lower prices for motor vehicle engines and motor vehicle parts (-0.3 percent), passenger cars and light trucks (-0.1 percent), and aircraft (-0.3 percent). Lower prices for motorized and recreational vehicles were closely linked to the appreciation of the Canadian dollar relative to the US dollar.

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 May to June, the Canadian dollar appreciated 0.4 percent relative to the US dollar. If the exchange rate had remained constant, the IPPI would have increased 0.7 percent instead of rising 0.6 percent.

The IPPI declined 0.8 percent over the 12-month period ending in June, after falling 0.9 percent in May.

The main reason for the year-over-year decrease in the IPPI was lower prices for energy and petroleum products (-11 percent). Motor gasoline (-11.4 percent), heavy fuel oils (-24 percent), diesel fuel (-8.7 percent) and light fuel oils (-6.7 percent) contributed to the decline in prices for energy and petroleum products. The IPPI excluding energy and petroleum products increased 0.8 percent in June from the same month last year.

Lower prices for chemicals and chemical products (-4 percent), specifically petrochemicals (-12.8 percent), plastic resins (-7.7 percent), and ammonia and chemical fertilizers (-14.1 percent) also contributed to the year-over-year drop in the IPPI.

Moderating the year-over-year decrease in the IPPI were higher prices for motorized and recreational vehicles (+2.4 percent), specifically passenger cars and light trucks (+2.8 percent) and aircraft (+4.9 percent).

Fruit, vegetables, feed and other food products (+3 percent) also posted year-over-year gains in June, primarily due to grain and oilseed products not elsewhere classified (+12.7 percent), other food products (+1.4 percent), and other animal feed (+4.6 percent).

Raw Materials Price Index

The RMPI rose 1.8 percent in June, after rising 7 percent in May. Of the six major commodity groups, four were up and two were down.

The gain in the RMPI was mainly attributable to higher prices for crude energy products (+3.5 percent), specifically conventional crude oil (+3.6 percent). The RMPI excluding crude energy products rose 0.6 percent in June.

Also contributing to the increase in the RMPI, but to a lesser extent, were animals and animal products (+1 percent). The gain was led by higher prices for hogs (+6.8 percent), while prices for cattle and calves (-1.6 percent) declined for a fifth straight month. Prices for cattle and calves have fallen 26.2 percent since peaking in May 2015.

Prices for crop products (+1 percent) rose in June, mainly due to increases in other miscellaneous crop products (+5 percent) and oilseeds, except canola (+2.7 percent). Lower prices for canola, including rapeseed (-3.4 percent), moderated the gain in this commodity group.

The RMPI fell 9 percent over the 12-month period ending in June.

Lower prices for crude energy products (-16 percent), specifically conventional crude oil (-16.2 percent), were largely responsible for the decrease. The RMPI excluding crude energy products was down 3.3 percent.

To a lesser extent, lower prices for animals and animal products (-7.2 percent) also contributed to the year-over-year decline in the RMPI. The decrease in this commodity group was led by lower prices for cattle and calves (-25.4 percent).

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