The 2020 Mid-Year Economic Update_long

Canadian Industrial Product Price Index Down 1.6 percent in December

Raw Materials Price Index declined 7.6 percent, largely due to lower prices for crude energy products.

The Canadian Industrial Product Price Index (IPPI) decreased 1.6 percent in December, mainly because of lower prices for energy and petroleum products. The Raw Materials Price Index (RMPI) declined 7.6 percent in December, largely as a result of lower prices for crude energy products. The IPPI (-1.6 percent) declined for the fourth straight month in December, after decreasing 0.5 percent in November. Of the 21 major commodity groups, 5 groups were down, 14 were up and 2 were unchanged.

Energy and petroleum products fell 11.5 percent in December, a sixth consecutive decrease. This was the largest decline since December 2008 when the commodity group fell 19.6 percent. The drop was mainly led by lower prices for motor gasoline (-14.7 percent) and, to a lesser extent, diesel fuel (-9.5 percent), light fuel oils (-9.7 percent) and heavy fuel oils (-16.9 percent). The IPPI excluding energy and petroleum products increased 0.3 percent in December.

Between June and December 2014, the price of motor gasoline declined 31.5 percent, while diesel fuel decreased 13.5 percent. In comparison, between June and December 2008, prices for motor gasoline and diesel fuel declined 56.5 percent and 42.6 percent respectively. Increased global production and decreased demand has had the effect of putting downward pressure on prices for petroleum products. When supply is high, motor gasoline tends to decline to a larger extent than other petroleum products such as diesel fuel. The average output from a barrel of crude oil produces roughly 44 percent gasoline and 31 percent diesel.

 Also contributing to the decrease in the IPPI were lower prices for chemicals and chemical products (-1.4 percent). The main reason for the decline in this commodity group was aromatic hydrocarbon gases (-13.8 percent) as well as liquefied refinery gases, and acyclic hydrocarbons not elsewhere classified (-10.5 percent). Slightly moderating the decline in this commodity group were higher prices for ammonia and chemical fertilizers (+3 percent).

Moderating the decline in the IPPI for December were higher prices for motorized and recreational vehicles (+1.1 percent). The main reason for the increase in this commodity group was higher prices for passenger cars and light trucks (+1.2 percent), motor vehicle engines and motor vehicle parts (+0.9 percent) as well as aircraft (+2 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, fruit, vegetables, feed and other food products (+0.8 percent) also moderated the decrease in the IPPI, primarily because of higher prices for other animal feed (+4.2 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 November to December, the Canadian dollar depreciated 1.8 percent relative to the US dollar. If the exchange rate had remained constant, the IPPI would have declined 2.1 percent instead of decreasing 1.6 percent.

The IPPI decreased 0.5 percent over the 12-month period ending in December, after increasing 1.9 percent in November. Compared with the same month in 2013, the decrease of the IPPI was mainly attributable to lower prices for energy and petroleum products (-18.4 percent), which posted its largest year-over-year decline since October 2009. Motor gasoline (-22.3 percent) and, to a lesser extent, diesel fuel (-17.4 percent), light fuel oils (-17.3 percent) and heavy fuel oils (-27.8 percent) were largely responsible for the decline in this commodity group. Year over year, the IPPI excluding energy and petroleum products rose 3.3 percent.

To a lesser extent, chemicals and chemical products (-1.4 percent) also contributed to the year-over-year decrease of the IPPI. The decline was primarily attributable to lower prices for petrochemicals (-16.2 percent), specifically aromatic hydrocarbon gases (-28.3 percent).

Conversely, the 12-month decrease of the IPPI was moderated mainly by motorized and recreational vehicles (+5.4 percent), as well as meat, fish and dairy products (+10.8 percent). The prices of passenger cars and light trucks (+5.2 percent), motor vehicle engines and motor vehicle parts (+4.6 percent) and aircraft (+10.2 percent) were the main reason for the growth in motorized and recreational vehicles. The increase in meat, fish and dairy products group was led mainly by prices for fresh and frozen beef and veal (+28.5 percent) and fresh and frozen pork (+17 percent).

Raw Materials Price Index

The RMPI (-7.6 percent) fell for the sixth consecutive month in December, after declining 5.7 percent in November. Of the six major commodity groups, three were up, two were down and one was unchanged.

The decline in the RMPI was primarily due to lower prices for crude energy products (-16.5 percent), specifically conventional crude oil (-17 percent), which fell for the sixth consecutive month. The decrease in the price of crude oil reflected a global surplus in the supply of crude oil. The RMPI excluding crude energy products increased 0.3 percent. Slightly moderating the decline in the RMPI were higher prices for crop products (+1.8 percent). The increase in this commodity group was mainly due to other crop products (+1.9 percent) as well as wheat (+5.5 percent).

The RMPI declined 13 percent over the 12-month period ending in December, after falling 4 percent in November. Compared with the same period in 2013, the decrease in the RMPI was almost entirely attributable to lower prices for crude energy products (-29.4 percent), which posted their largest decline since September 2009. Conventional crude oil (-30.3 percent) was the main reason for the decline in this commodity group. The RMPI excluding crude energy products rose 5.1 percent year over year.

The 12-month decrease in the RMPI was primarily moderated by a 14.5 percent gain in prices for animals and animal products, which have been rising year over year since April 2013. Live animals (+24.6 percent), specifically cattle and calves (+45.2 percent) and, to a lesser extent, hogs (+13.1 percent), were the biggest contributors to the increase in this commodity group.

Compared with December 2013, the decrease in the RMPI was also moderated by crop products (+4.3 percent), mainly as a result of higher prices for wheat (+15.6 percent), fresh fruit, nuts and vegetables (+5.6 percent) as well as other crop products (+1.4 percent).

About the Author
Leave a Reply

Leave a Comment

Sign Up for the MDM Update Newsletter

The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.

By subscribing, you are agreeing to MDM’s Privacy Policy.

0

articles left

This is your last free article

Subscribe to MDM Premium today and get:

  • Unlimited access to MDM.com
  • 1 year digital subscription, with new issues twice a month
  • Trends analysis, market data and quarterly economic updates
  • Deals on select store products and events

2

articles left

Want more Premium content from MDM?

Subscribe today and get:

  • New issues twice each month
  • Unlimited access to mdm.com, including 10+ years of archived data
  • Current trends analysis, market data and economic updates
  • Discounts on select store products and events

1

article
left

You have one free article remaining

Subscribe to MDM Premium to get unlimited access. Your subscription includes:

  • Two new issues a month
  • Access to 10+ years of archived data on mdm.com
  • Quarterly economic updates, trends analysis and market data
  • Store and event discounts

To continue reading, you must be an MDM Premium subscriber.