The 2020 Mid-Year Economic Update_long

Canadian Industrial Product Price Index Up 0.2% in August

The Raw Materials Price Index declined 2.2 percent in August

The Canadian industrial product price index increased 0.2 percent in August, mainly because of higher prices for motorized and recreational vehicles. The Raw Materials Price Index (RMPI) declined 2.2 percent, largely as a result of lower prices for crude energy products.

IPPI Monthly Change

The IPPI increased 0.2 percent in August after declining 0.3 percent in July. The increase in the IPPI was broad based, as 15 of the 21 major commodity groups were up.

The increase in the IPPI was led by higher prices for motorized and recreational vehicles (+1 percent). The main reasons for the increase in this commodity group were higher prices for passenger cars and light trucks (+0.8 percent), motor vehicle engines and motor vehicle parts (+0.8 percent), as well as aircraft (+1.9 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 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 calculation of the index. From July to August, the Canadian dollar decreased 1.7 percent relative to the US dollar. If the exchange rate had remained constant, the IPPI would have declined 0.2 percent instead of increasing 0.2 percent.

To a lesser extent, prices for primary non-ferrous metal products (+0.7 percent) also contributed to the increase in the IPPI, primarily because of higher prices for unwrought aluminum and aluminum alloys (+4.5 percent). This was the largest increase for unwrought aluminum and aluminum alloys since June 2013.

Meat, fish and dairy products (-0.9 percent) moderated the increase in the IPPI, declining for the first time since May 2014. Meat products declined 1.6 percent in August, led by lower prices for fresh and frozen pork (-6.4 percent), while higher prices for fresh and frozen beef and veal (+1.1 percent) helped moderate that decline.

Energy and petroleum products declined for the second consecutive month, edging down 0.2 percent. While lower prices for motor gasoline (-2.4 percent) were brought on by higher than normal crude oil inventories, lubricants and other petroleum refinery products (+3.3 percent) as well as asphalt and asphalt products (+3 percent) moderated that decline. The IPPI excluding energy and petroleum products edged up 0.2 percent in August.

Also moderating the increase in the IPPI were lower prices for chemical and chemical products (-0.6 percent), mainly because of petrochemicals (-2.7 percent).

IPPI 12-Month Change

The IPPI rose 2.5 percent during the 12-month period ending in August, after posting a 2.8 percent gain in July.

Compared with August 2013, the advance of the IPPI was mainly attributable to meat, fish, and dairy products (+9.1 percent), specifically fresh and frozen beef and veal (+25.6 percent) and fresh and frozen pork (+18.1 percent).

Year-over-year prices for motorized and recreational vehicles were up 3.1 percent, mainly resulting from higher prices for passenger cars and light trucks (+2.7 percent), motor vehicle engines and motor vehicle parts (+2.6 percent) as well as aircraft (+6.8 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 percent) also contributed to the year-over-year increase of the IPPI, primarily because of higher prices for petrochemicals (+10.3 percent), ammonia and chemical fertilizers (+5.9 percent) as well as plastic resins (+8.3 percent).

On a year-over-year basis, primary ferrous metal products increased 7.6 percent, reflecting higher prices for iron and steel basic shapes (+10.1 percent) as well as wire and other rolled and drawn steel products (+9.8 percent).

Primary non-ferrous metal products increased 3 percent, primarily as a result of higher prices for unwrought aluminum and aluminum alloys (+7.8 percent); other unwrought non-ferrous metals and non-ferrous metal alloys (+11.4 percent) as well as basic and semi-finished products of aluminum and aluminum alloys (+8.3 percent).

RMPI Monthly Change

The RMPI declined 2.2 percent in August, following a 1.4 percent decrease in July. The August decline in the index was the third in nine months and the largest since November 2013. Of the six major commodity groups, four were down and two were up.

The decrease in the RMPI was largely attributable to lower prices for crude energy products (-3.3 percent), which were down for a second consecutive month. Lower prices for conventional crude oil (-3.3 percent) were mainly responsible for the decline in this commodity group. The RMPI excluding crude energy products fell 0.9 percent.

Animals and animal products also put downward pressure on the RMPI, as prices declined 2.2 percent, after rising 4.8 percent the previous month. Live animals (-3.3 percent), particularly hogs (-9.9 percent), were responsible for the decrease in the animals and animal products group. The downward movement of this commodity group was moderated primarily by prices for cattle and calves, which increased 2.2 percent.

Crop products (-1 percent) were also down compared with July, mostly as a result of lower prices for other crop products (-1.6 percent), particularly oilseeds (except canola) and grains (except wheat).

The decrease in the RMPI was moderated slightly by prices for metal ores, concentrates and scrap, which rose 0.3 percent in August, following a 2.3 percent advance the previous month.

RMPI 12-Month Change

The RMPI declined 0.6 percent during the 12-month period ending in August, after increasing 2.5 percent in July. On a year-over-year basis, it was the first decrease in the index since November 2013.

Compared with the same period in 2013, the decline in the RMPI was mainly due to lower prices for crude energy products (-4.9 percent), which posted the largest decrease since January 2013. Conventional crude oil (-5.1 percent) was the primary source of this decline. On a year-over-year basis, the RMPI excluding crude energy products was up 4.4 percent.

Crop products (-4.1 percent) also contributed to the year-over-year decrease in the RMPI, as a result of lower prices for other crop products (-6.5 percent), wheat (-9.2 percent) and canola (-10.2 percent). On a year-over-year basis, crop product prices have been on a downward trend since July 2013.

The decline of the RMPI over the 12-month period was moderated mainly by higher prices for animals and animal products (+13.8 percent), which have been rising since April 2013. The main contributors to the increase in this commodity group were live animals (+22.9 percent), particularly cattle and calves (+39.7 percent) and hogs (+20.4 percent).

Compared with the same month a year earlier, the decrease in the RMPI was also moderated by metal ores, concentrates and scrap (+1.2 percent), which posted a fourth consecutive year-over-year increase.

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