Industrial product and raw materials price indexes, June 2020
Prices for products manufactured in Canada, as measured by the Industrial Product Price Index (IPPI), rose 0.4% in June, driven mainly by higher prices for energy and petroleum products. Prices for raw materials purchased by manufacturers operating in Canada, as measured by the Raw Materials Price Index (RMPI), increased 7.5%, as a result of higher prices for crude energy products.
Industrial Product Price Index
The IPPI increased 0.4% in June, following a 1.2% increase in May. Of the 21 major commodity groups, 2 were up, 17 were down, and 2 were unchanged.
The growth in the IPPI was mostly a result of increased prices for energy and petroleum products (+15.0%) in June, particularly refined petroleum energy, and biofuels (+19.1%), which were influenced by higher prices for crude oil. Motor gasoline (+17.7%) was the largest contributor to the increase in refined petroleum products, up for a second consecutive month. Light fuel oils (+24.0%), diesel fuel (+20.8%), and jet fuel (+28.5%) all increased following five months of decline. Prices for jet fuel are associated with air travel, which has been slowly recovering in Canada. Data on weekly aircraft movements show that by the end of June, domestic aircraft movements had rebounded 122.0% since bottoming to historic lows in April 2020.
Excluding energy and petroleum products, the IPPI decreased by 1.0%. Prices for meat, fish, and dairy products declined 3.4%, mostly due to price decreases for fresh and frozen pork, which were down 15.4% in June after rising 31.3% in May. The volatility observed in recent months in this sector is partly attributable to supply chain issues. The decline in June was partially attributable to oversupply.
Motorized and recreational vehicles (-1.4%), electrical, electronic, audiovisual, and telecommunication products (-1.1%), as well as pulp and paper products (-1.1%) also posted decreases.
Year over year, the IPPI decreased by 3.1% in June, mostly due to a 29.7% decrease in prices for energy and petroleum products. Excluding energy products, the IPPI was up 1.1% year over year.
Raw Materials Price Index
The RMPI increased 7.5% in June, following a 16.4% increase in May. Of the six major commodity groups, two were up and four were down.
The gain in the RMPI was driven mostly by rising prices for conventional crude oil (+25.0%). Increased economic activity due to the easing of shutdowns, combined with restrained petroleum production worldwide, drove up the price of crude oil in June. According to the US Energy Information Administration, global petroleum demand exceeded global supply in June for the first time since December 2019.
Metal ores, concentrates, and scrap (+1.6%) also contributed to the increase in the RMPI, albeit to a lesser extent. Prices for copper ores and concentrates rose 5.5%, its second consecutive monthly increase. Copper prices are closely associated with economic activity, as copper is a raw material with wide-ranging applications. In June, data from the Chinese National Bureau of Statistics indicated that the Manufacturing Purchasing Managers Index (PMI) increased to 50.6; a PMI of over 50 represents an expansion in the manufacturing industry. China is the world's largest consumer of copper.
Prices for silver ores, concentrates and mill bullion also rose in June, up 10.3%. There are numerous factors playing into this price increase. Even as lockdowns are eased, investors continue to purchase silver as a safe haven. Shortage concerns due to mine shutdowns caused by COVID-19 are also adding to uncertainty regarding the supply chain. In addition, silver is a common element used in industrial applications, so expectations of global industrial recovery in the second half of 2020 are also playing a part in driving its demand.
Excluding crude energy products, the RMPI was down 0.3% in June. Prices for live animals were down 2.8%, primarily due to a 12.2% decrease in the price of hogs, which followed a 21.0% increase in May. The decrease in hog prices in June is partly attributable to oversupply; the volatility that has been observed in this market in recent months is partly attributable to supply chain issues.
On a year-over-year basis, the RMPI decreased 13.5% in June, mostly due to a 30.4% decrease in prices for crude energy products. Excluding crude energy products, the RMPI edged down 0.1% year over year.
Note to readers
With each release, data for the previous six months may have been revised. The indexes are not seasonally adjusted.
The Industrial Product Price Index reflects the prices that producers in Canada receive as goods leave the plant gate. The IPPI does not reflect what the consumer pays. Unlike the Consumer Price Index, the IPPI excludes indirect taxes and all costs that occur between the time a good leaves the plant and the time the final user takes possession of the good. This includes transportation, wholesale and retail costs.
Canadian producers export many goods. They often indicate their prices in foreign currencies, especially in US dollars, and these prices are then converted into Canadian dollars. In particular, this is the case for motor vehicles, pulp and paper products, and wood products. Therefore, fluctuations in the value of the Canadian dollar against its US counterpart affect the IPPI. However, the conversion to Canadian dollars reflects only how respondents provide their prices. This is not a measure that takes into account the full effect of exchange rates.
The conversion of prices received in US dollars is based on the average monthly exchange rate established by the Bank of Canada and available in table 33-10-0163-01 (series v111666275). Monthly and annual variations in the exchange rate, as described in the release, are calculated according to the indirect quotation of the exchange rate (for example, CAN$1 = US$X).
The Raw Materials Price Index 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.
Upcoming changes: Basket update and methodology changes
Changes will be coming to the IPPI and RMPI in the fall of 2020. The indexes will be converted from 2010 = 100 to January 2020 = 100 and also updated to use a weighting pattern based on the 2016 production values of Canadian manufacturers.
At the same time, the IPPI and RMPI will be modernized with the adoption of a weighted geometric (Jevons) formula and incorporation of parental imputation as the default imputation methodology for missing price quotes.
Commencing with the release of the new basket in the fall, the IPPI and RMPI will be released using the North American Product Classification System (NAPCS) Canada 2017 version 2.0 and the North American Industry Classification System (NAICS) Canada 2017 version 3.0. Product indexes will be published at the class (five-digit) level. The current vectors will be terminated, and new tables based on the updated classification systems will appear in the Statistics Canada tables.
Statistics Canada has launched the Producer price indexes portal as part of a suite of portals for prices and price indexes. This webpage provides Canadians with a single point of access to a variety of statistics and measures related to producer prices.
The video "Producer Price Indexes" is available on the Statistics Canada Training Institute webpage. It provides an introduction to Statistics Canada's producer price indexes—what they are, how they are made and what they are used for.
Real-time table 18-10-0248-01 will be updated on August 10.
The industrial product and raw materials price indexes for July will be released on August 31.
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca) or Media Relations (613-951-4636; STATCAN.mediahotline-ligneinfomedias.STATCAN@canada.ca).