In March, the Canadian Industrial Product Price Index (IPPI) rose 0.9 percent and the Raw Materials Price Index (RMPI) grew a substantial 5.7 percent, according to Statistics Canada. The strong increase in petroleum prices was the main reason for the advance of both indexes.

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The IPPI was up 0.9 percent in March, the same growth rate as in February. The growth in March was primarily driven by an 8.2 percent increase in petroleum and coal products. Meat, fish and dairy products (+1.4 percent) and chemical products (+0.7 percent) made more modest contributions.

Prices for petroleum and coal products rose sharply in March, influenced by reduced production in oil-producing countries.

In March, excluding petroleum and coal products, the IPPI would have decreased 0.1 percent following seven consecutive monthly increases.

The IPPI advance was moderated by a 0.8 percent decline in prices for motor vehicles and other transportation equipment. The decrease was largely the result of the 1.1 percent appreciation of the Canadian dollar relative to the US dollar.

Some Canadian producers who export their products to the United States are generally paid on the basis of prices set in US dollars. Consequently, the strength of the Canadian dollar in relation to the US dollar had the effect of reducing the corresponding prices in Canadian dollars. Without the impact of the exchange rate, the IPPI would have risen 1.1 percent instead of 0.9 percent.

After contributing to the increase in the IPPI during the previous eight months, prices for primary metal products declined 0.3 percent in March. Copper and copper alloy products and nickel products, which both decreased 5.8 percent, made strong contributions to the decline in primary metal prices. Reduced production in Asia had a significant impact on demand for metals. However, the decline in these primary metals was moderated by higher prices for precious metals, which continued to rise in March.

12-Month Change
The IPPI rose 5.0 percent in March compared with the same month a year earlier, after advancing 3.1 percent in January and 3.8 percent in February. Of the 21 major commodity aggregations, 15 were up and 4 decreased.

In the past 12 months, the IPPI advance was driven mainly by higher prices for petroleum and coal products (+24.3 percent) and primary metal products (+13.6 percent).

Year over year, the largest contributors to the increase in primary metal products were precious metals, particularly silver and platinum (+83.6 percent), as well as precious metal basic manufactured shapes (+85.6 percent).

In March, the 4.8 percent year-over-year increase in the value of the Canadian dollar relative to the US dollar dampened the IPPI advance. Without the impact of the exchange rate, the IPPI would have risen 6.0 percent instead of 5.0 percent.

Prices for motor vehicles and other transportation equipment, which are particularly sensitive to the exchange rate, fell 2.3 percent in March compared with the same month a year earlier, continuing the downward movement that started in October 2009.

If petroleum and coal prices were excluded, the year-over-year IPPI would have increased 2.5 percent in March, a faster growth rate than the 2.1 percent advance observed in January and February. This index, year over year, has been increasing since May 2010.

Raw Materials Price Index
The Raw Materials Price Index (RMPI) rose a substantial 5.7 percent in March, almost exclusively as a result of higher prices for crude oil (+16.2 percent).

Non-ferrous metals (-4.0 percent) and vegetable products (-4.3 percent) slightly dampened the impact of higher crude oil prices on the RMPI.

Copper and nickel concentrates (-8.8 percent), radioactive concentrates (-6.0 percent), and zinc concentrates (-5.9 percent) were the biggest contributors to the decline of non-ferrous metals prices. However, the decrease in non-ferrous metals was moderated by the rising prices of precious metals, particularly silver and platinum (+12.1 percent).

The decrease in vegetable product prices in March was mainly attributable to lower prices for natural rubber and allied gums (-14.7 percent), partly as a result of weaker demand from Japan. Following prospects of good harvests, including an increase in seeding intentions, the price of grains declined, specifically wheat (-4.6 percent) and corn (-3.5 percent).

Excluding mineral fuels, the RMPI would have decreased 1.9 percent in March, registering the first decline since July 2010.

Compared with the same month a year earlier, the RMPI was up 16.7 percent in March, following gains of 9.6 percent in January and 11.3 percent in February. Year over year, the RMPI has been on an upward trend since November 2009. The main contributors to the RMPI year-over-year increase in March were mineral fuels (+16.5 percent), non-ferrous metals (+23.1 percent), vegetable products (+38.9 percent), and animals and animal products (+9.0 percent).

Year over year, if mineral fuels were excluded, the RMPI would have risen 16.9 percent in March, slower than the 19.8 percent growth rate observed in February.