In December, the Canadian Industrial Product Price Index (IPPI) rose 0.7 percent and the Raw Materials Price Index was up 4.2 percent compared with November, according to Statistics Canada. The upward trend in the two indexes was sustained by higher prices for petroleum and metals.

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The IPPI was up for the fifth consecutive month. The increase in December was led mainly by petroleum and coal products (+4.0 percent) and, to a lesser extent, by primary metal products (+1.7 percent) and chemical products (+0.9 percent).

Higher prices for petroleum and coal products in December were supported mainly by positive signs from the American economy and increased demand due in part to colder weather in the northern hemisphere.

Primary metal products prices rose 1.7 percent, following a 0.8 percent gain in November. All metals were up, but copper and precious metals made the strongest contributions. World demand for copper has been strong as supply continued to be constrained. There were also production interruptions. Demand for precious metals continued to grow steadily and resulted mainly in higher prices for silver and platinum (+9.4 percent) and precious metal basic manufactured shapes (+2.3 percent).

The IPPI advance was moderated by a 0.4 percent decline in prices for motor vehicles and other transportation equipment. This decrease was attributable to a 0.5 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 0.8 percent instead of 0.7 percent.

In December, if petroleum and coal prices were excluded, the IPPI would have increased 0.4 percent, following gains of 0.1 percent in October and 0.2 percent in November.

12-month change
The IPPI rose 2.9 percent in December compared with the same month a year earlier, after advancing 2.2 percent in November. The upward trend continued with the index posting its ninth consecutive year-over-year increase.

In the past 12 months, the upward pressure on the IPPI has come mainly from higher prices for petroleum and coal products (+13.7 percent), primary metal products (+11.4 percent) and, to a lesser extent, chemical products (+1.9 percent) and fruits, vegetables and feeds (+2.5 percent).

The 4.6 percent increase in the value of the Canadian dollar relative to the US dollar dampened the IPPI year-over-year advance in December. Without the impact of the exchange rate, the IPPI would have risen 3.9 percent instead of 2.9 percent.

Prices for motor vehicles and other transportation equipment, which are particularly sensitive to the exchange rate, fell 2.4 percent in December compared with the same month a year earlier, continuing the downward movement that started in October 2009.

Year-over-year, if petroleum and coal prices were excluded, the IPPI would have increased 1.6 percent in December, the same growth rate as in November and the eighth consecutive year-over-year advance.

Raw Materials Price Index
The Raw Materials Price Index rose 4.2 percent in December, mainly because of higher prices for mineral fuels (+5.6 percent), non-ferrous metals (+3.9 percent) and vegetable products (+6.3 percent). Crude oil prices were up 6 percent in December, following a 7.7 percent increase in November.

Copper and nickel concentrates (+4.9 percent) and radioactive products (+12.7 percent) were the biggest contributors to the advance in non-ferrous metals price index.

Excluding mineral fuels, the RMPI would have increased for the sixth consecutive month, rising 2.9 percent in December following a 0.6 percent increase in November.

Compared with the same month a year earlier, the RMPI was up 13.2 percent, following a 6.9 percent increase in November. Year-over-year, the RMPI has been on an upward trend since November 2009. Higher prices for mineral fuels (+13.0 percent), non-ferrous metals (+17.8 percent) and vegetable products (+28.6 percent) were the main factors in the RMPI year-over-year advance in December.

Year-over-year, if mineral fuels were excluded, the RMPI would have increased 13.2 percent in December following an 11.3 percent advance in November.