Industrial product and raw materials price indexes
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In March, the Industrial Product Price Index (IPPI) rose 0.9% and the Raw Materials Price Index (RMPI) grew a substantial 5.7%. The strong increase in petroleum prices was the main reason for the advance of both indexes.
The IPPI was up 0.9% in March, the same growth rate as in February. The growth in March was primarily driven by an 8.2% increase in petroleum and coal products. Meat, fish and dairy products (+1.4%) and chemical products (+0.7%) made more modest contributions.
Prices for petroleum and coal products rose sharply in March, influenced by reduced production in oil-producing countries.
In March, excluding petroleum and coal products, the IPPI would have decreased 0.1% following seven consecutive monthly increases.
The IPPI advance was moderated by a 0.8% decline in prices for motor vehicles and other transportation equipment. The decrease was largely the result of the 1.1% 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 1.1% instead of 0.9%.
Note to readers
All data in this release are seasonally unadjusted and are subject to revision for six months (for example, when the July index is released, the index for the preceding January becomes final).
The Industrial Product Price Index (IPPI) reflects the prices that producers in Canada receive as the goods leave the plant gate. It does not reflect what the consumer pays. Unlike the Consumer Price Index, the IPPI excludes indirect taxes and all the costs that occur between the time a good leaves the plant and the time the final user takes possession of it, including the transportation, wholesale, and retail costs.
Canadian producers export many goods. They often indicate their prices in foreign currencies, especially in US dollars, which are then converted into Canadian dollars. In particular, this is the case for motor vehicles, pulp, paper and wood products. Therefore, a rise or fall in the value of the Canadian dollar against its US counterpart affects the IPPI. But the conversion into Canadian dollars only reflects how respondents provide their prices. Moreover, this is not a measure that takes into account the full effect of exchange rates, since that is a more difficult analytical task.
The conversion of prices received in US dollars is based on the average monthly exchange rate (noon spot rate) established by the Bank of Canada, and it is available on CANSIM in table 176-0064 (series v37426). Monthly and annual variations in the exchange rate, as described in the text, are calculated according to the indirect quotation of the exchange rate (for example, CAN$1=US$X).
The Raw Materials Price Index (RMPI) reflects the prices paid by Canadian manufacturers for key raw materials. Many of those prices are set on the world market. However, as few prices are denominated in foreign currencies, their conversion into Canadian dollars has only a minor effect on the calculation of the RMPI.
After contributing to the increase in the IPPI during the previous eight months, prices for primary metal products declined 0.3% in March. Copper and copper alloy products and nickel products, which both decreased 5.8%, made strong contributions to the decline in primary metal prices. Reduced production in Asia had a significant impact on demand for metals. However, the decline in these primary metals was moderated by higher prices for precious metals, which continued to rise in March.
12-month change in the IPPI: The upward trend continues
The IPPI rose 5.0% in March compared with the same month a year earlier, after advancing 3.1% in January and 3.8% in February. Of the 21 major commodity aggregations, 15 were up and 4 decreased.
In the past 12 months, the IPPI advance was driven mainly by higher prices for petroleum and coal products (+24.3%) and primary metal products (+13.6%).
Year over year, the largest contributors to the increase in primary metal products were precious metals, particularly silver and platinum (+83.6%), as well as precious metal basic manufactured shapes (+85.6%).
In March, the 4.8% year-over-year increase in the value of the Canadian dollar relative to the US dollar dampened the IPPI advance. Without the impact of the exchange rate, the IPPI would have risen 6.0% instead of 5.0%.
Prices for motor vehicles and other transportation equipment, which are particularly sensitive to the exchange rate, fell 2.3% in March compared with the same month a year earlier, continuing the downward movement that started in October 2009.
If petroleum and coal prices were excluded, the year-over-year IPPI would have increased 2.5% in March, a faster growth rate than the 2.1% advance observed in January and February. This index, year over year, has been increasing since May 2010.
Raw Materials Price Index: Strong upward trend
The Raw Materials Price Index (RMPI) rose a substantial 5.7% in March, almost exclusively as a result of higher prices for crude oil (+16.2%).
Non-ferrous metals (-4.0%) and vegetable products (-4.3%) slightly dampened the impact of higher crude oil prices on the RMPI.
Copper and nickel concentrates (-8.8%), radioactive concentrates (-6.0%), and zinc concentrates (-5.9%) were the biggest contributors to the decline of non-ferrous metals prices. However, the decrease in non-ferrous metals was moderated by the rising prices of precious metals, particularly silver and platinum (+12.1%).
The decrease in vegetable product prices in March was mainly attributable to lower prices for natural rubber and allied gums (-14.7%), partly as a result of weaker demand from Japan. Following prospects of good harvests, including an increase in seeding intentions, the price of grains declined, specifically wheat (-4.6%) and corn (-3.5%).
Excluding mineral fuels, the RMPI would have decreased 1.9% in March, registering the first decline since July 2010.
Compared with the same month a year earlier, the RMPI was up 16.7% in March, following gains of 9.6% in January and 11.3% in February. Year over year, the RMPI has been on an upward trend since November 2009. The main contributors to the RMPI year-over-year increase in March were mineral fuels (+16.5%), non-ferrous metals (+23.1%), vegetable products (+38.9%), and animals and animal products (+9.0%).
Year over year, if mineral fuels were excluded, the RMPI would have risen 16.9% in March, slower than the 19.8% growth rate observed in February.
Available on CANSIM: tables 329-0056 to 329-0068 and 330-0007.
Table 329-0056: Industrial Product Price Index by major commodity aggregations.
Table 329-0057: Industrial Product Price Index by industry.
Table 329-0058: Industrial Product Price Index by stage of processing.
Tables 329-0059 to 329-0068: Industrial Product Price Index by commodity.
Table 330-0007: Raw Materials Price Index by commodity.
Definitions, data sources and methods: survey numbers, including related surveys, 2306 and 2318.
The March 2011 issue of Industry Price Indexes (62-011-X, free) will soon be available.
The industrial product and raw material price indexes for April will be released on May 31.
For more information, or to enquire about the concepts, methods or data quality of this release, contact Client Services (toll-free 1-888-951-4550; 613-951-4550; fax: 613-951-3117; ppd-info-dpp@statcan.gc.ca), Producer Prices Division.
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