Industrial product and raw materials price indexes
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Led by higher motor vehicle prices, the Industrial Product Price Index (IPPI) rose for a second consecutive month, increasing 0.4% from August to September. The Raw Materials Price Index (RMPI) increased 1.4% as a result of higher prices for crude oil.
Prices for industrial goods continue to rise
In September, the IPPI reached its highest level since August 2008. The advance of the index was largely attributable to motor vehicles (+1.3%). Petroleum and coal products (+0.7%), lumber and other wood products (+1.0%) and chemical products (+0.5%) also contributed to the increase.
The decline in the value of the Canadian dollar against the US dollar in September contributed significantly to the increase in the IPPI and, in particular, the higher prices of motor vehicles. The value of the Canadian dollar declined 2.0% in September relative to the US dollar, following a 2.8% decrease in August.
Some Canadian producers who export their products are generally paid on the basis of prices set in US dollars. Consequently, the weakness 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 remained unchanged instead of climbing 0.4%.
In September, 3 of the 21 product groups declined, notably meat, fish and dairy products (-0.4%) and primary metal products (-0.2%).
Note to readers
All data in this release are seasonally unadjusted and usually subject to revision for a period of six months (for example, when the July index is released, the index for the previous 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 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.
The largest contributors to the decrease in primary metal products were nickel products (-5.8%) and copper products (-1.2%). These declines reflected a significant slowdown in industrial activity worldwide, especially in Asia. However, higher prices for gold and gold alloys in primary forms (+3.6%) exerted a strong moderating influence on the decline in prices of primary metal products.
Excluding petroleum and coal products, the IPPI would have risen 0.5% in September, following a 0.7% gain in August.
12-month change in the IPPI: Steady growth for a seventh consecutive month
The IPPI was up 5.3% in September from the same month a year earlier, which was similar to the average rate of growth since March. Of the 21 major commodity aggregations, 16 were up and 4 declined.
Compared with September 2010, the IPPI was pushed upward mainly by higher prices for petroleum and coal products (+30.2%). Also contributing to the advance were primary metal products (+7.8%), chemical products (+8.1%) and fruit, vegetable and feed products (+6.7%).
Year over year, petroleum and coal products remained on an upward trend, posting gains since November 2009. September's increase in prices was comparable with the gains recorded between May and August.
The largest contributors to the advance in primary metal products were precious metals, particularly silver and platinum (+74.8%), precious metal basic manufactured shapes (+56.6%) and gold and gold alloys in primary forms (+35.9%).
In September, the 3.0% year-over-year increase 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 6.0% instead of 5.3%.
The increase of the IPPI was moderated slightly in September by lower prices for motor vehicles and other transportation equipment (-1.0%).
Year over year, excluding petroleum and coal, the IPPI would have climbed 2.5% in September, comparable to the growth rate in August (+2.4%) and continuing the upward trend that began in May 2010.
Raw Materials Price Index: Pushed higher by crude oil prices
Following four consecutive monthly declines, the RMPI rose 1.4% in September, led by higher prices for crude oil (+4.5%). The advance of the RMPI was modest compared with the previous declines, and the index remained 9.9% below the peak recorded in April 2011.
Mineral fuels rose 4.1% in September on the strength of the increase in crude oil. Crude oil prices were very volatile in September, rising in the first half of the month and declining in the second half. The last two weeks of the month were marked by reduced world demand and excess inventory.
The growth in the RMPI in September was moderated by lower prices for animals and animal products (-3.2%) and vegetable products (-1.1%).
Prices for slaughter hogs fell 16.9%, ending a series of nine consecutive monthly increases. In North America, demand contracted sharply and inventories were high. However, demand in Asia moderated the decline in prices.
Prices for oilseeds fell 5.1% in September, following forecasts of better-than-expected harvests and slumping global demand, especially for soybeans (-11.8%) and canola (-1.8%). Grain prices were also down, particularly corn (-1.7%).
There was no change in non-ferrous metals in September, as large advances in radioactive products (+4.2%) and precious metals (+2.5%) were offset by decreases in copper and nickel concentrates (-1.4%) and zinc concentrates (-1.8%).
Excluding mineral fuels, the RMPI would have declined 1.0% in September, following a 0.4% gain in August.
Compared with the same month a year earlier, the RMPI rose 15.2% in September following a 13.3% increase in August. The main factors in the year-over-year advance of the RMPI in September were higher prices for mineral fuels (+20.8%), non-ferrous metals (+12.3%), vegetable products (+22.6%) and animals and animal products (+9.6%).
Excluding mineral fuels, the year-over-year RMPI would have risen 10.5% in September. This marked the third consecutive slowdown in the year-over-year increase of this index since the 19.4% gain in June.
Prices for raw materials rise
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.
The September 2011 issue of Industry Price Indexes (62-011-X, free) will be available soon.
The industrial product and raw materials price indexes for October will be released on November 30.
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: 1-855-314-8765 or 613-951-3117; firstname.lastname@example.org), Producer Prices Division.
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