In February, Canada’s Industrial Product Price Index (IPPI) rose 0.4% compared with January, due to both the depreciation of the Canadian dollar against the US dollar and increases in the prices for precious metals and petroleum products, according to Statistics Canada. The Raw Materials Price Index (RMPI) advanced 1.7 % compared with January, pushed up by rising crude oil prices.
The IPPI rose 0.4% in February, a modest upturn following the stability in the index in January and the declines of 2.7% and 2.2% recorded in November and December respectively.
Motor vehicles and other transport equipment rose 1.1% as a result of the depreciation of the Canadian dollar in relation to its US counterpart. The prices for primary metal products increased 2.2%, pushed up by precious metals; these have been subject to strong global demand, since they are seen as a hedge in a period of economic uncertainty. Prices for petroleum and coal products advanced 1.2%, a second consecutive monthly increase.
The Canadian dollar lost 1.5% of its value against the US dollar in February. Some Canadian producers who export their products to the United States are generally paid in prices set in US dollars.
Consequently, the relative strength of the US dollar in relation to the Canadian dollar had the effect of inflating the corresponding prices in Canadian dollars. If the exchange rate used to convert these prices had remained unchanged, the IPPI would have shown no change compared with January instead of rising 0.4%.
12-Month Change
Year over year, the IPPI grew 1.6% in February, an increase comparable to the 1.4% rise observed in January. The effect on the IPPI of higher prices for motor vehicles and other transport equipment as well as pulp and other paper products was largely offset by lower prices for petroleum and coal products and primary metal products.
On a 12-month basis, prices for petroleum and coal products fell 27.8%, compared with the 28.4% decline in January. Prices for products excluding petroleum and coal products rose 5.4%, which is similar to the 5.2% increase recorded in January.
The Canadian dollar has lost 19.8% of its value since February 2008, and had the direct effect of the exchange rate been excluded, the IPPI would have declined 5.5% in February instead of increasing 1.6%.
Raw Materials Price Index
The RMPI posted a month-over-month increase of 1.7% in February, comparable to January’s 1.5% rise. This was a second consecutive monthly increase for the RMPI, and almost all the growth in February was attributable to mineral fuels.
Mineral fuels rose 4.8%, up from the 2.4% gain recorded in January. Excluding mineral fuels, the RMPI posted a 0.4% decrease, following the 0.9% rise observed in January. Vegetable products, non-ferrous metals and wood posted the strongest price declines.
From February 2008 to February 2009, raw material prices fell 30.7%, comparable to the variations recorded in December and January. The year-over-year drop in raw material prices was attributable to the strong 45.5% price reduction for mineral fuels and, to a lesser extent, to decreases in prices for non-ferrous metals (-36.1%) and vegetable products (-23.2%).
Source: Statistics Canada
