Between July and August, the Canadian Industrial Product Price Index (IPPI) increased 0.5 percent, led by motor vehicles and chemical products, according to Statistics Canada. The Raw Materials Price Index (RMPI) fell 3.2 percent, largely as a result of lower prices for mineral fuels.

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The increase of the IPPI in August was the first in three months, and was primarily the result of higher prices for motor vehicles and other transport equipment (+1.7 percent) and chemicals and chemical products (+0.7 percent). Pulp and paper products (+0.9 percent) and electrical and communication products (+0.9 percent) also contributed to the advance.

Contributing to the increase in the price of motor vehicles and other transport equipment were higher prices for automobiles, trucks and buses (+2.5 percent) and motor vehicle parts (+0.9 percent). The 2.8 percent decline in the value of the Canadian dollar against the US dollar in August contributed significantly to the rise in motor vehicle prices.

Some Canadian producers who export their products are paid on the basis of prices set in US dollars. Consequently, the decline of the Canadian dollar in relation to the US dollar had the effect of increasing the corresponding prices in Canadian dollars. Without the impact of the exchange rate, the IPPI would have fallen 0.2 percent instead of rising 0.5 percent.

The rise in the IPPI in August was moderated by a 1.1 percent decline in petroleum and coal product prices.

Excluding petroleum and coal products, the IPPI would have risen 0.7 percent in August, following a 0.5 percent decline in July.

12-month Change in IPPI
The IPPI was up 5.2 percent in August compared with the same month a year earlier, which was similar to the rate of change observed in the previous five months. Of the 21 major commodity aggregations, 16 advanced and 5 declined.

Compared with August 2010, the increase in the IPPI was mainly a result of higher prices for petroleum and coal products (+29.8 percent) and primary metal products (+10.7 percent). Chemicals and chemical products (+8.7 percent) also contributed to the advance.

Year over year, prices for petroleum and coal products continued the upward trend that began in November 2009. The increase in August was smaller than July, but similar to advances reported since April 2011.

The largest contributors to the year-over-year price increase of primary metal products were precious metals, in particular silver and platinum (+92.5 percent), precious metal basic manufactured shapes (+72.5 percent) and copper products (+15.5 percent).

Chemicals and chemical products (+8.7 percent) and fruit, vegetables, feeds and other food products (+7.2 percent) made smaller contributions to the year-over-year IPPI increase in August.

In August, the 6.0 percent year-over-year gain in the value of the Canadian dollar relative to the US dollar slowed the advance of the IPPI. Without the impact of the exchange rate, the IPPI would have risen 6.6 percent instead of 5.2 percent.

The year-over-year increase in the IPPI in August was moderated by lower prices for motor vehicles and other transport equipment (-2.8 percent), pulp and paper products (-2.2 percent) and lumber and other wood products (-1.7 percent).

Excluding petroleum and coal prices, the year-over-year IPPI would have increased 2.4 percent in August instead of 5.2 percent. This continues the upward trend that began in May 2010.

Raw Materials Price Index
The RMPI declined by 3.2 percent in August compared with the previous month. This was larger than declines in June and July, but was smaller than the decrease reported in May.

The decline of the RMPI resulted mainly from mineral fuels, which were down 7 percent. Crude oil prices fell 7.5 percent in August, marking the fourth consecutive monthly decrease. Uncertainty over global growth affected prices until mid August, when some stabilization was observed.

Contributing to the decline in the RMPI in August were lower prices for non-ferrous metals (-2.3 percent), largely influenced by copper and nickel concentrates (-5.6 percent) and non-ferrous metal scrap (-3.6 percent). Grains (-1.6 percent) continued its decline from July.

Prices for animal and animal products (+3.4 percent), ferrous materials (+2.1 percent), coffee, tea and cocoa (+2.3 percent) as well as rubber and allied gums (+1.8 percent) moderated the decrease in the RMPI.

Excluding mineral fuels, the RMPI would have increased 0.3 percent in August.

Compared with the same month a year earlier, the RMPI was up 13.3 percent in August, the smallest year-over-year increase since February 2011. The main contributors to the advance were higher prices for mineral fuels (+12.2 percent), non-ferrous metals (+16.7 percent), vegetable products (+31.5 percent) as well as animal and animal products (+11.7 percent).

Year over year, excluding mineral fuels, the RMPI would have risen 14.3 percent in August compared with 17.3 percent in July.