The 2020 Mid-Year Economic Update_long

Canadian Industrial Product Price Index Up 0.5% in May

Raw Materials Price Index rose 4.4 percent, largely due to higher prices for crude energy products.

The Canadian Industrial Product Price Index increased 0.5 percent in May, mainly because of higher prices for energy and petroleum products. The Raw Materials Price Index (RMPI) increased 4.4 percent, largely as a result of higher prices for crude energy products. The increase in IPPI in May followed a 0.9 percent decline in April. Of the 21 commodity groups, 3 were up, 15 were down and 3 were unchanged.

The increase in May was led by higher prices for energy and petroleum products (+5 percent). The rise was mainly due to prices for motor gasoline (+7.1 percent), and, to a lesser extent, diesel fuel (+3.6 percent) and heavy fuel oils (+9 percent). Prices for motor gasoline have rebounded so far in 2015, increasing 27.1 percent since January, largely as a result of rising crude oil prices. The IPPI excluding energy and petroleum products declined 0.2 percent.

Moderating the increase in the IPPI were lower prices for motorized and recreational vehicles (-0.8 percent). The decline was mainly due to passenger cars and light trucks (-0.8 percent), motor vehicle engines and motor  vehicle parts (-0.6 percent), as well as aircraft (-1.1 percent). Lower prices for motorized and recreational vehicles were closely linked to the appreciation of the Canadian dollar relative to the US dollar.

Also tempering the increase in the IPPI were lower prices for primary non-ferrous metal products (-0.8 percent), in large part due to lower prices for unwrought precious metals and precious metal alloys (-1 percent). However, higher prices for unwrought copper and copper alloys (+2.9 percent) moderated the decrease.

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 April to May 2015, the Canadian dollar appreciated 1.2 percent relative to the US dollar. If the exchange rate had remained constant, the IPPI would have risen 0.7 percent instead of increasing 0.5 percent.

The IPPI declined 1.3 percent over the 12-month period ending in May, after falling 2.4 percent in April.

In May, the year-over-year decline in the IPPI was primarily due to lower prices for energy and petroleum products (-21.2 percent). The main reasons for the decline in this commodity group were lower prices for motor gasoline (-21.4 percent), diesel fuel (-23.7 percent), as well as light fuel oils (-18.8 percent). The IPPI excluding energy and petroleum products increased 2.7 percent year over year.

Also contributing to the decline were lower prices for chemicals and chemical products (-4.3 percent), led by petrochemicals (-24.2 percent) and, to a lesser extent, plastic resins (-6.4 percent). Moderating the decline were higher prices for ammonia and chemical fertilizers (+8.7 percent), as well as chemical products, not elsewhere classified (+5.8 percent).

The year-over-year decline in the IPPI was moderated by an increase in prices for motorized and recreational vehicles (+8.4 percent). The rise was mainly due to passenger cars and light trucks (+9 percent), motor vehicle engines and motor vehicle parts (+6 percent), as well as aircraft (+13.3 percent).

Raw Materials Price Index

The RMPI rose 4.4 percent in May, following a 4 percent increase in April. Of the six commodity groups, three were up and three were down.

The gain was mainly attributable to higher prices for crude energy products (+8.8 percent), specifically conventional crude oil (+9.4 percent). Following the decline in oil prices in the latter half of 2014, the price of conventional crude oil has increased 37.2 percent since January 2015. The RMPI excluding crude energy products increased 1.1 percent.

Also contributing to the rise in the RMPI were higher prices for animals and animal products (+3.7 percent). The increase was largely the result of higher prices for hogs (+19.7 percent), which posted their largest increase since March 2014, when prices rose 24.3 percent.

The RMPI fell 17 percent in the 12-month period ending in May, following a 20.7 percent decline in April.

Lower prices for crude energy products were largely responsible for the decline (-31.2 percent), specifically conventional crude oil (-31.6 percent). The RMPI excluding crude energy products fell 0.7 percent from the same month last year.

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