Canada’s Industrial Product Price Index Unchanged in May

Canada's Raw Materials Price Index falls 1 percent in May, largely due to lower prices for crude oil.

In May, the Industrial Product Price Index (IPPI) was unchanged from April. Price increases for motor vehicles and other transportation equipment (+1 percent) and lumber and other wood products (+1.7 percent) were offset mainly by a 2.1 percent decline in petroleum and coal products. The Raw Materials Price Index (RMPI) fell 1 percent, largely because of lower prices for crude oil.

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Industrial Product Price Index
Of the 21 major commodity groups, 11 were up, 6 were down, and 4 were unchanged.

Motor vehicles and other transportation equipment (+1 percent) and lumber and other wood products (+1.7 percent) were among the product groups that experienced growth. More modest advances were observed in pulp and paper products (+0.7 percent) and machinery and equipment (+0.5 percent).

The motor vehicles and other transportation equipment group was pushed upward by an increase in prices for motor vehicles (+1.6 percent), which rose for the first time in six months. The decline in the value of the Canadian dollar against the US dollar was partly responsible for the May increase in motor vehicle prices.

Softwood lumber (+3.9 percent) was the leading factor in the increase in lumber and other wood products. These prices rose in conjunction with the demand for building permits for houses and apartment buildings in the United States, which reached its highest level in May in over three years.

Some Canadian producers who export their products are generally paid on the basis of prices set in US dollars. Consequently, the 1.7 percent depreciation of the Canadian dollar in relation to the US dollar in May had the effect of increasing the corresponding prices in Canadian dollars. Without the impact of the exchange rate, the IPPI would have fallen 0.4 percent instead of being unchanged.

Conversely, the decline in petroleum and coal products was mainly attributable to a 3.6 percent decrease in gasoline prices, which were down for the first time since the beginning of the year.

Among the other product groups that declined were primary metals (-1.3 percent), which posted a third consecutive decrease. The largest contributor to the decline was other non-ferrous metal products (-3.7 percent), particularly precious metal basic manufactured shapes (-11.9 percent). Also down were nickel products (-3.3 percent), aluminum products (-0.6 percent) and copper and copper alloy products (-0.6 percent).

The IPPI excluding petroleum and coal products rose 0.2 percent in May.

12-Month Change in IPPI
Compared with the same month a year earlier, the IPPI was up 0.7 percent in May. This is a deviation from the trend of decelerating growth observed in recent months. Between September 2011 and April 2012, the year-over-year growth rate of the index fell from 5.6 percent to 0.5 percent.

The IPPI was pushed upward mainly by higher prices for motor vehicles and other transportation equipment (+3 percent), particularly motor vehicles (+4.0 percent).

More modest increases were seen in lumber and other wood products (+5.9 percent), particularly softwood lumber (+13.1 percent). Fruit, vegetables, feeds and other food products (+2.1 percent) and machinery and equipment (+3.2 percent) also contributed to the increase.

Compared with May 2011, the advance of the IPPI was moderated largely by primary metal products (-7.5 percent), which posted a seventh consecutive decline. There was also a decrease in petroleum and coal products (-0.9 percent), the first since 2009.

The 4.1 percent year-over-year decline in the value of the Canadian dollar against the US dollar contributed to the advance of the index. Without the impact of the exchange rate, the IPPI would have fallen 0.3 percent instead of increasing 0.7 percent.

The IPPI excluding petroleum and coal products was up 0.8 percent from May 2011.

Raw Materials Price Index
The RMPI posted its fourth straight decline in May, falling 1 percent. All major product groups except one were down. Previously, the index had experienced decreases of 1.6 percent in March and 2.0 percent in April.

The RMPI's decline was mostly due to mineral fuels (-2.1 percent), particularly crude oil (-2.2 percent). More modest downward pressure was exerted on the index by vegetable products (-0.7 percent) and non-ferrous metals (-0.2 percent).

The main factors in the decrease in vegetable products were oilseeds (-1.4 percent), unrefined sugar (-9.7 percent) and natural rubber and allied gums (-3.6 percent). In the oilseeds group, soybeans (-4.8 percent) and canola (-1.5 percent) were down for the first time since the beginning of 2012.

Non-ferrous metals were pushed down largely by precious metals (-3.1 percent), especially silver and platinum (-5.9 percent). Other contributors to the decrease in this commodity group were nickel concentrates (-3.2 percent) and copper concentrates (-0.4 percent). The decline in nickel prices was attributable in part to weaker demand for steel.

The only product group to post an advance in May was wood (+2.1 percent), mostly because of higher prices for logs and bolts (+2.5 percent).

The RMPI excluding mineral fuels edged down 0.1 percent.

12-Month Change in RMPI
Compared with the same month a year earlier, the RMPI was down 9.9 percent, its third consecutive decrease. However, the decline was smaller than in April, when the index fell 13.6 percent.

The index was pulled downward primarily by mineral fuels (-15.9 percent), specifically crude oil (-16.1 percent). Also contributing to the decline were non-ferrous metals (-10 percent), particularly copper concentrates (-12.8 percent) and nickel concentrates (-28.7 percent).

The only commodity group to post an increase relative to the same month last year was animal and animal products (+2.1 percent). Higher prices for slaughter cattle (+9.1 percent) and slaughter calves (+7.3 percent) were the main factors in the advance.

Year over year, the RMPI excluding mineral fuels was down 3.9 percent.

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