Industrial product and raw materials price indexes

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Petroleum and metals pushed up the prices for manufactured goods and raw materials in April.

From March to April, prices charged by manufacturers, as measured by the Industrial Product Price Index (IPPI), registered a sixth consecutive monthly increase. The 0.2% rise in the index basically reflects the strength of prices for petroleum and coal products and primary metal products.

On a 12-month basis, the IPPI went up 3.7% in April, a lower rate of growth than the increase of 4.9% in March. The upward pressure came largely from higher prices for primary metal products. The upward movement was slowed by a drop in prices for lumber and other wood products and motor vehicles.

From March to April, the Raw Materials Price Index (RMPI) rose by 3.3%, its third consecutive monthly increase. The monthly advance in the index was mainly attributable to mineral fuels and non-ferrous metals. Vegetable products and ferrous materials were the only groups that declined.

Compared with April 2006, raw materials cost plants 7.9% more, a lower rate of increase than those posted in February and March. The rise in the index was mainly led by non-ferrous metals and was moderated by mineral fuels.

In April, the IPPI was 118.2 (1997=100), up from March's revised level of 118.0. The RMPI was 173.9 (1997=100), up from March's revised level of 168.4.

IPPI: Price index pushed up by petroleum products and primary metals

Month over month, manufacturers' prices were mainly propelled by rising prices for petroleum and coal products and primary metal products.

Prices for petroleum and coal products climbed 3.6% following two monthly surges in February (+4.6%) and March (+8.9%). Continuing low international inventories of petroleum, combined with forecasts of excess demand, continued to exert upward pressure on the prices of petroleum products. If the prices for petroleum and coal products had been excluded, the IPPI would have declined 0.2% instead of rising 0.2%.

The prices for primary metal products increased 1.1% in April, after rising 2.4% in February and 3.7% in March. Prices for metal products were pushed up by a surge in copper prices, still driven by Asian demand. Prices for copper and copper alloy products jumped 12.0%, and the index returned to the level observed before the steep declines between November 2006 and January 2007. The rise in copper prices was partly offset by lower prices for aluminum (-3.3%) and nickel (-1.2%). Nickel prices underwent a small correction after rising sharply in 2006 and the first quarter of 2007.

Other than petroleum and coal products and primary metal products, chemical products were the only group that made a significant contribution to the IPPI's growth, with a monthly increase of 1.0%. Prices for chemical products were pushed up by higher costs for materials as well as problems with rail transportation.

In April, the rise in the IPPI was tempered by lower prices for motor vehicles (-1.9%), pulp and paper products (-1.6%), machinery and equipment (-0.6%), electrical and communication products (-0.7%), lumber and other wood products (-0.6%) and fruit, vegetables and feed products (-0.4%).

IPPI: Primary metals continue to lead the 12-month change

The IPPI rose 3.7% from April 2006 to April 2007, a lower rate of increase than in the previous two months. The IPPI was boosted by rising prices for primary metals and, to a lesser extent, by higher prices for chemical products, meat, fish and dairy products, fruit, vegetables and feed products, pulp and paper products, and petroleum and coal products. The IPPI excluding petroleum and coal grew at a pace comparable to that of preceding months. If the prices for petroleum and coal products had been excluded, the year-over-year rise in the IPPI would have been 4.1% instead of 3.7%.

Prices for primary metals were up 19.8% from April 2006. Year-over-year price increases were observed for nickel products (+157.9%), copper and copper alloy products (+22.1%), precious metal basic manufactured shapes (+25.7%), refined zinc products (+13.0%) and gold and gold alloy products (+12.7%).

The annual rate of growth in the IPPI was moderated slightly by lower prices for lumber and other wood products (-3.6%), motor vehicles (-0.6%) and rubber, leather and plastic fabricated products (-1.4%).

RMPI: Prices for mineral fuels and non-ferrous metals keep rising

In April, raw materials prices rose 3.3%, a higher rate of increase than in the first three months of 2007.

Mineral fuels climbed 3.8%, up from the 0.3% increase observed in March. With its 4.4% surge, the price of crude oil was behind much of the increase in mineral fuels. Without mineral fuels, the RMPI would have increased 2.9% from March instead of rising 3.3%.

Prices for non-ferrous metals jumped 7.4%, propelling the index to a new record high. Prices for all non-ferrous metal groups were affected by vigorous demand and falling inventories. In addition, higher prices for petroleum made substitutes such as radioactive products more attractive. In April, the rise in prices was attributable to radioactive concentrates (+20.2%), copper concentrates (+14.7%), zinc concentrates (+3.4%) and copper and copper alloy scrap (+9.4%).

On a 12-month basis, raw materials prices advanced 7.9% in April, a deceleration from the 10.5% year-over-year increase recorded in March. The 4.7% decline in mineral fuels slowed the rise of the total index. Without mineral fuels, the RMPI would have increased 21.6% instead of 7.9%.

Non-ferrous metals accounted for most of the 12-month increase, with prices rising 41.2%, mainly on the strength of year-over-year increases in the prices for radioactive concentrates and concentrates of lead, nickel, zinc and copper.

Prices were also up over the previous year in the case of animals and animal products (+8.9%), wood (+12.7%), vegetable products (+16.7%) and ferrous materials (+14.2%).

However, prices for mineral fuels were down 4.7%, owing to lower prices for crude oil (-4.4%) and natural gas (-7.1%). Natural gas prices continued to rebound, as the year-over-year decrease was smaller than those recorded in the first three months of 2007.

Impact of the exchange rate

The value of the Canadian dollar against the US dollar rose nearly 3.0% from March to April. Consequently, without the effect of the exchange rate, the IPPI would have risen 1.0% instead of 0.2%.

On a 12-month basis, the value of the Canadian dollar rose 0.8% against the US dollar. If the impact of the exchange rate had been excluded, producer prices would have risen 3.9% between April 2006 and April 2007 rather than 3.7%.

Prices for intermediate goods driven up by petroleum and metals

Prices for intermediate goods rose 0.6% from March to April, a rate of increase lower than the March level of 1.4%. Most of the increase in the prices for intermediate goods was due almost exclusively to petroleum products and primary metal products. Chemical products also contributed to the increase but to a lesser degree. However, the increase in prices was eased by lower prices for pulp and paper products, motor vehicles, lumber products as well as fruit, vegetable and feed products.

Producers of intermediate goods received 5.5% more for their products in April 2007 than in April 2006. Higher prices were observed for primary metal products, chemical products, fruit, vegetables and feed products, pulp and paper products, and meat, fish and dairy products. However, the decrease in lumber prices tempered the year-over-year increase.

Prices for finished products are down after five consecutive monthly increases

Prices for finished products fell 0.5% from March to April, the result of a decrease in prices for motor vehicles, a sector that is more sensitive to exchange rate variations. Declines were also recorded for machinery and equipment, electrical and communication products, and lumber products. The decrease in finished product prices was partly offset by higher prices for petroleum and coal products.

Since April 2006, prices for finished products have risen 0.8%. Higher prices were observed for meat, fish and dairy products, tobacco products, chemical products, fruit, vegetables and feed products, and beverages. The increase in the index was slowed by lower prices for motor vehicles.

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 April 2007 issue of Industry Price Indexes (62-011-XWE, free) will soon be available.

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

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

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