The 2020 Mid-Year Economic Update_long

Canadian Industrial Product Price Index Up 0.5% in June

Raw Materials Price Index was unchanged for the month.

The Canadian Industrial Product Price Index increased 0.5 percent in June, mainly because of higher prices for energy and petroleum products and motorized and recreational vehicles. The Raw Materials Price Index was unchanged in June, as lower prices for metal ores, concentrates and scrap were mostly offset by higher prices for crude energy products.

The increase in IPPI in June followed a 0.5 percent increase in May. Of the 21 commodity groups, 15 were up, 4 were down and 2 were unchanged.

The increase in June was led by higher prices for energy and petroleum products (+2 percent). The rise in prices was primarily due to motor gasoline (+5.9 percent), while lower prices for light fuel oils (-2.4 percent) and diesel fuel (-1.8 percent) moderated the gain. The IPPI excluding energy and petroleum products increased 0.4 percent.

Also contributing to the June increase in the IPPI was motorized and recreational vehicles (+1.2 percent). The increase was led by higher prices for passenger cars and light trucks (+1.3 percent) and, to a lesser extent, motor vehicle engines and motor vehicle parts (+0.8 percent) and aircraft (+1.5 percent). Higher prices for motorized and recreational vehicles were closely linked to the depreciation of the Canadian dollar relative to the US dollar.

To a lesser extent, higher prices for meat, fish, and dairy products (+0.9 percent) and chemicals and chemical products (+0.8 percent) also contributed to the rise in the IPPI in June.

Fresh and frozen pork (+2.3 percent) and fresh and frozen chicken (+3.4 percent) were the main reasons for the increase in meat, fish and dairy products. Higher prices for petrochemicals (+3 percent) and other basic inorganic chemicals (+1.6 percent) led the increase for chemicals and chemical products.

Largely moderating the increase in the IPPI were lower prices for primary non-ferrous metal products (-1.5 percent), which posted a fourth consecutive decline and the largest drop since September 2014. The decline in this commodity group was led by lower prices for unwrought copper and copper alloys (-5 percent), which posted its largest drop since March 2014, when prices fell 6.2 percent. Also contributing to the decline, but to a lesser extent, were unwrought precious metals and precious metal alloys (-0.8 percent) as well as unwrought aluminum and aluminum alloys (-2 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 May to June 2015, the Canadian dollar depreciated 1.5 percent relative to the US dollar. If the exchange rate had remained constant, the IPPI would have increased 0.2 percent instead of increasing 0.5 percent.

The IPPI declined 0.9 percent over the 12-month period ending in June, after falling 1.3 percent in May.

In June, the year-over-year decline in the IPPI was primarily attributable to lower prices for energy and petroleum products (-19.7 percent). The main reasons for the decline were motor gasoline (-18.8 percent) and, to a lesser extent, diesel fuel (-23.3 percent) and light fuel oils (-20.4 percent). The IPPI excluding energy and petroleum products increased 3.1 percent year over year.

Also contributing to the decline were lower prices for chemicals and chemical products (-3.9 percent), led by lower prices for petrochemicals (-24.5 percent). The decline in this commodity group was moderated by higher prices for ammonia and chemical fertilizers (+13.6 percent) and chemical products, not elsewhere classified (+5.6 percent).

The year-over-year decline in the IPPI was moderated by higher prices for motorized and recreational vehicles (+9.7 percent). The rise was mainly attributable to passenger cars and light trucks (+10.3 percent), motor vehicle engines and motor vehicle parts (+6.9 percent) and aircraft (+15.6 percent).

Higher prices for meat, fish, and dairy products (+5.5 percent), specifically fresh and frozen beef and veal (+27.5 percent) also moderated the year-over-year decline in the IPPI.

Raw Materials Price Index

The RMPI was unchanged in June, following a 4.4 percent gain in May. Of the six commodity groups, four were up and two were down.

Prices for crude energy products posted a third consecutive increase, rising 1.1 percent, mainly as a result of higher prices for conventional crude oil (+0.8 percent). The RMPI excluding crude energy products declined 0.8 percent.

Also contributing to the increase were higher prices for crop products (+1.6 percent) as well as animals and animal products (+0.5 percent).

Higher prices for canola (+7.7 percent) and wheat (+4.4 percent) were the main reasons behind the rise in crop products. The gain in animals and animal products was led by an increase in hogs (+5.1 percent), while lower prices for cattle and calves (-1 percent) moderated the increase.

Largely moderating the increase in the RMPI in June were lower prices for metal ores, concentrates and scrap (-3.2 percent). This was the largest drop in this commodity group since April 2013, when prices fell 8.2 percent.

The RMPI fell 17.5 percent in the 12-month period ending in June, following a 16.6 percent decline in May.

Lower prices for crude energy products (-31.9 percent) were largely responsible for the decline, specifically conventional crude oil (-32.5 percent). The RMPI excluding crude energy products declined 0.5 percent from the same month last year.

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