Industrial product and raw materials price indexes

Raw materials prices rose sharply for the second consecutive month due to higher prices for crude oil and non-ferrous metals. Prices for manufactured goods at the factory gate edged up in May.

Prices charged by manufacturers, as measured by the Industrial Product Price Index (IPPI), were up 0.3% from April to May. Higher prices for primary metal products and petroleum products were the major contributors to this monthly increase.

The 12-month change in the IPPI was 2.5%, up from April's year-over-year increase of 2.2%. Upward pressure came mainly from higher prices for petroleum products and primary metal products.

The Raw Materials Price Index (RMPI) was up 5.6% from April to May, following a 5.7% increase in April, due primarily to higher prices for crude oil and non-ferrous metals.

Compared to May of last year, raw materials cost factories 23.4% more, up significantly from the year-over-year change of 13.1% in April, and the largest year-over-year increase since October 2004.

The IPPI stood at 114.2 (1997=100) in May, up from April's level of 113.9. The RMPI reached 170.2 (1997=100), up from a revised level of 161.1 in April.

IPPI: Prices for primary metals continue to increase

On a month-over-month basis, manufacturers' prices were up 0.3%, mainly due to higher prices for primary metal products as well as petroleum products.

Prices for primary metal products continue their upward pressure with a 6.8% increase compared to April. Strong demand, low inventories and supply constraints pushed up prices for primary copper products (+30.2%), primary aluminum products (+10.2%), primary nickel products (+11.4%), refined zinc products (+8.4%) as well as refined gold products (+9.3%).

Petroleum and coal products prices increased by only 1.0% compared to April, a significant drop from the 9.6% increased observed in the previous month. If petroleum and coal product prices had been excluded, the IPPI would have increased 0.2% rather than 0.3%.

Prices for meat, fish and dairy products as well as metal fabricated products also increased in May but to a much lesser degree.

However, prices for motor vehicles and other transport equipment were down 2.0% from April, as the Canadian dollar continues to strengthen. Lumber and other wood products decreased 1.3% from April to May, mainly due to a decline in construction activity as well as an ample supply of softwood lumber.

Prices for chemical products, electrical and communication products, pulp and paper products as well as machinery and equipment also declined in May.

IPPI: Petroleum and primary metal products remain the major contributors to the 12-month change

On a 12-month basis, the IPPI was up 2.5% in May, a slight increase from the year-over-year change of 2.2% in April.

Prices for petroleum and coal products rose 25.3% from May 2005, up from April's increase of 19.5%. If petroleum and coal product prices had been excluded, the IPPI would have increased 0.4%, rather than 2.5% from a year ago.

Prices for primary metal products were up 19.9% compared to a year ago. Record high prices on a year-over-year basis were observed again for copper products (+115.2%) and refined zinc products (+146.4%). Prices for aluminum (+23.3%), silver (+61.9%) and gold (+43.2%) products also contributed to the annual increase.

Prices were also higher than one year ago for rubber, leather and plastic fabricated products, chemical products, non-metallic mineral products, tobacco products, fruit, vegetable and feed products and furniture and fixtures.

On the other hand, motor vehicles and other transport equipment prices were down 8.0% from a year ago, mainly as a result of a stronger Canadian dollar.

Lumber and other wood products declined 3.8% from May 2005 to May 2006, as year-over-year decreases were recorded for softwood lumber (-6.7%) and pulpwood chips (-6.8%).

Prices for pulp and paper products, meat, fish and dairy products, electrical and communication products as well as machinery and equipment were also down from a year ago.

RMPI: Crude oil and non-ferrous metals push up raw materials prices

On a monthly basis, raw materials prices rose 5.6% in May, following a 5.7% increase in April. Mineral fuels increased 6.7% compared to April. Prices for crude oil were up by 7.8%, mainly due to continued concerns over supply. If mineral fuels had been excluded, the RMPI would have increased 4.5% instead of rising 5.6%.

Non-ferrous metals prices rose 11.3%, down from the 15.6% increase recorded in April. Strong demand, lower inventories and supply concerns pushed up prices for copper (+30.4%), zinc (+9.1%), radio-active concentrates (+4.9%), gold (+9.3%) and nickel (+11.4%).

Prices for animals and animal products, vegetable products and wood products also contributed to the monthly increase.

Prices for ferrous materials fell 0.8% as prices for iron ore decreased 3.0% from April.

On a 12-month basis, the price of raw materials rose 23.4% in May, a significant increase from the 13.1% year-over-year increase observed in April. This is the largest year-over-year increase since October 2004.

Mineral fuels were up 27.2% with crude oil prices rising 31.1% and natural gas prices increasing 9.0% from a year ago. If mineral fuels had been excluded, the RMPI would have increased 19.7% instead of rising 23.4%.

Prices for non-ferrous metals rose 76.7%, mainly because of higher prices for zinc, copper, radio-active concentrates, gold and silver. Prices for ferrous materials, vegetable products and non-metallic minerals were also up from a year ago.

On the other hand, prices for animals and animal products were down 0.3% compared to May 2005 as lower prices for hogs for slaughter were almost offset by higher prices for cattle for slaughter and unprocessed whole milk.

Impact of the exchange rate

Between April and May, the value of the Canadian dollar against the US dollar was up 3.1%. As a result, the total IPPI excluding the effect of the exchange would have risen 1.1% instead of its actual increase of 0.3%.

On a 12-month basis, the value of the Canadian dollar rose 13.2% against the US dollar. If the impact of the exchange rate had been excluded, producer prices would have risen 5.8% between May 2005 and May 2006, rather than their actual increase of 2.5%.

Prices for intermediate goods are up

Prices for intermediate goods increased 0.9% from April. Higher prices for primary metal products, petroleum products, meat, fish and dairy products as well as metal fabricated products were the major contributors to this monthly rise.

These increases were partly offset by lower prices for motor vehicles, lumber products, chemical products, pulp and paper products and machinery and equipment.

Producers of intermediate goods received 5.0% more for their goods in May 2006 than in May 2005. Higher prices were registered for petroleum products, primary metal products, rubber, leather and plastic fabricated products, non-metallic mineral products and chemical products.

These increases were partly offset by lower prices for motor vehicles, lumber products, pulp and paper products, meat, fish and dairy products and electrical and communication products.

Finished goods prices decrease

On a monthly basis, prices for finished goods were down 0.9% from April. Lower prices for motor vehicles, electrical and communication products, petroleum products, and machinery and equipment were the major contributors to this monthly decline.

These decreases were partly offset by higher prices for meat, fish and dairy products as well as pulp and paper products.

Compared with May 2005, prices for finished goods decreased 1.3%. Lower prices for motor vehicles, electrical and communication products, machinery and equipment and meat, fish and dairy products were partially offset by higher prices for petroleum products, tobacco products, fruit, vegetable and feed products, furniture and fixtures, chemical products and rubber, leather and plastic fabricated products.

Available on CANSIM: tables 329-0038 to 329-0049 and 330-0006.

Definitions, data sources and methods: survey numbers, including related surveys, 2306 and 2318.

The May 2006 issue of Industry Price Indexes (62-011-XIE, free, 62-011-XPE, $24/$233) will be available in July.

The industrial product and raw material price indexes for June will be released on July 28.

For more information, or to enquire about the concepts, methods or data quality of this release, contact the Client Services Unit (613-951-9606, fax: 613-951-1539, infounit@statcan.gc.ca) or Danielle Gouin (613-951-3375, danielle.gouin@statcan.gc.ca), Prices Division.