The 2020 Mid-Year Economic Update_long

Canadian Industrial Product Price Index Up 1.8 percent in February

Raw Materials Price Index rose 6.1 percent, largely due to higher prices for crude energy products.

The Canadian Industrial Product Price Index (IPPI) increased 1.8 percent in February, largely as a result of higher prices for energy and petroleum products. The Raw Materials Price Index (RMPI) rose 6.1 percent in February, largely due tohigher prices for crude energy products. The IPPI +1.8 percent) increased for the first time in six months in February, after decreasing 0.3 percent in January. The last time the IPPI posted an increase was August 2014, when the index rose 0.3 percent. The rise in the IPPI was widespread as 16 commodity groups were up, 4 were unchanged and 1 was down.

The largest contribution to the rise in the IPPI in February was energy and petroleum products (+8.8 percent). This was the first increase in the commodity group since June 2014 and the largest gain since June 2009. The rise was mainly due to higher prices for motor gasoline (+13.2 percent) and, to a lesser extent, light fuel oils (+10.5 percent) and diesel fuel (+9.9 percent). The IPPI excluding energy and petroleum products increased 0.7 percent.

Also contributing to the increase in the IPPI were higher prices for motorized and recreational vehicles (+2.2 percent), mainly due to higher prices for passenger cars and light trucks (+2.3 percent), motor vehicle engines and motor vehicle parts (+1.6 percent) as well as aircraft (+3.3 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.

Primary non-ferrous metal products (+1.2 percent) posted a third consecutive increase in February, largely due to higher prices for unwrought aluminum and aluminum alloys (+3.1 percent) as well as unwrought precious metals and precious metal alloys (+0.8 percent). The increase in this commodity group was slightly moderated by a decline in unwrought copper and copper alloys (-2 percent).

Chemicals and chemical products (+0.5 percent) rose for the first time since September 2014. The increase was mainly due to higher prices for dyes and pigments, and petrochemicals (+1.7 percent), basic chemicals (+0.6 percent) as well as fertilizers, pesticides and other chemical products (+0.6 percent). Slightly moderating the gain were lower prices for plastic resins (-0.7 percent).

The lone commodity group to decline in February was meat, fish, and dairy products (-0.2 percent), primarily as a result of lower prices for fresh and frozen pork (-2.1 percent). Higher prices for fresh and frozen beef and veal (+0.9 percent) moderated the decline.

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 January to February, the Canadian dollar depreciated 3.2 percent relative to the US dollar. If the exchange rate had remained constant, the IPPI would have increased 1 percent instead of rising 1.8 percent.

The IPPI decreased 1.6 percent over the 12-month period ending in February, after decreasing 2.1 percent in January.

Compared with the same month in 2014, the decrease of the IPPI was mainly attributable to lower prices for energy and petroleum products (-24.8 percent). Motor gasoline (-25.2 percent) and, to a lesser extent, diesel fuel (-26 percent) and light fuel oils (-23.6 percent) were the main reason for the decline in this commodity group. The IPPI excluding energy and petroleum products rose 3.3 percent year over year.

Chemicals and chemical products (-8.3 percent) also put downward pressure on the IPPI, mainly as a result of lower prices for aromatic hydrocarbon gases (-43.1 percent), which have been declining year over year since September 2014. Liquefied refinery gases, acyclic hydrocarbons not elsewhere classified (-31.8 percent) also contributed significantly to the decrease in chemicals and chemical products.

The 12-month decline in the IPPI was mainly moderated by higher prices for motorized and recreational vehicles (+9.1 percent). The increase in this commodity group was largely due to higher prices for passenger cars and light trucks (+9.4 percent), motor vehicle engines and motor vehicle parts (+7.5 percent) as well as aircraft (+15 percent).

Meat, fish and dairy products (+9 percent) and primary non-ferrous metal products (+4.2 percent) also moderated the decline in the IPPI compared with February 2014.

Prices for fresh and frozen beef and veal (+28.4 percent), fresh and frozen pork (+9.4 percent) and processed meat products, other meats and animal by-products (+8 percent) were largely responsible for the increase in meat, fish and dairy products. Unwrought aluminum and aluminum alloys (+18.5 percent) and basic and semi-finished aluminum products (+16.6 percent) led the increase in non-ferrous metals.

 Raw Materials Price Index

The RMPI rose 6.1 percent in February, the first increase in the index since June 2014. Of the six commodity groups, five were up and one was down. The increase in the RMPI was largely a result of higher prices for crude energy products (+16 percent), specifically conventional crude oil (+17 percent), which posted the largest increase since March 2009. The RMPI excluding crude energy products increased 0.3 percent. Also contributing to the increase in the RMPI, but to a lesser extent, were higher prices for crop products (+1.9 percent). The rise was mainly due to a 7.3 percent increase in oilseeds (except canola and soybeans). The lone moderating effect on the RMPI was lower prices for animals and animal products (-1.2 percent), specifically hogs (-7.4 percent). Slightly higher prices for cattle and calves (+1.3 percent) moderated the decline.

The RMPI declined 21.8 percent over the 12-month period ending in February, after falling 21.9 percent in January. The decline in the RMPI was mainly the result of a 41.7 percent decrease in crude energy product prices. Conventional crude oil (-42.7 percent) was the main reason for the decrease in this commodity group.

Year over year, the RMPI excluding crude energy products rose 2.2 percent in February. To a lesser extent, metal ores, concentrates and scrap (-2.7 percent) also contributed to the year-over-year decline in the RMPI.

The 12-month decrease in the RMPI was moderated by higher prices for animals and animal products (+6.6 percent), which have been rising on a year-over-year basis since April 2013. Prices for live animals (+12.7 percent), specifically cattle and calves (+40.8 percent), were responsible for the increase in this commodity group. The increase in the animals and animal products group was mainly moderated by lower prices for hogs (-13.2 percent).

The decline in the RMPI was also moderated, to a lesser extent, by a 5.2 percent increase in prices for crop products. Other crop products (+4.2 percent), wheat (+10.8 percent) and canola (+12.7 percent) were largely responsible for the increase in crop products.

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