Industrial product and raw materials price indexes, July 2021
The Industrial Product Price Index (IPPI) fell 0.4% month over month in July, and was up 15.4% year over year. The Raw Materials Price Index (RMPI) rose 2.2% on a monthly basis in July and 37.7% year over year.
Industrial Product Price Index
In July, the Industrial Product Price Index (IPPI) fell 0.4% on a monthly basis.
Among the 21 major commodity groups, 17 were up, 3 were down, and 1 was unchanged.
The biggest influence on the IPPI in July was the decline in lumber and other wood products (-23.0%), primarily driven by a 37.7% drop in prices for softwood lumber, the biggest monthly decline on record for this product group. Despite uncertainty due to extreme heat and forest fires in timber-producing regions, prices fell for the second month in a row. This decrease was partially attributable to lower demand: housing starts in the US, the primary purchaser of Canadian softwood, were down 7.0% on a monthly basis in July. Excluding lumber and other wood products from calculation, the IPPI would have risen 1.5% in July.
Prices for basic and semi-finished iron or steel products were up 5.9% in July, an 11th consecutive monthly increase. Compared with July 2020, prices are 50.9% higher, the biggest year-over-year increase on record. The increase in steel and iron has been mainly driven by strong demand from China. However, the ascent has been volatile due to uncertainty about environmental policy, infrastructure spending, and the effects of the COVID-19 Delta variant. In August, benchmark prices for iron and steel, which are typically correlated, decoupled. A curb on steel output in China has reduced demand for iron ore, pushing on its price downward.
Prices of the energy and petroleum products commodity group rose 3.1%. Prices were higher for refined petroleum energy products (+2.9%). Prices for chemicals and chemical products were up 3.4%, mostly driven by an increase in prices for petrochemicals (+13.4%). Prices in both these groups coincided with higher prices for their feedstocks, including crude oil and natural gas liquids.
Year over year, the IPPI rose 15.4% in July, a 12th consecutive advance, following a 17.2% increase in June. This was mostly driven by higher prices for energy and petroleum products (+46.9%), primary ferrous metal products (+49.8%), as well as lumber and other wood products (+39.1%) compared with July 2020.
Raw Materials Price Index
In July, the Raw Materials Price Index (RMPI), was up by 2.2%, a 10th consecutive monthly increase. Of the six main commodity groups, five were up and one was down.The main contributor to the upward movement was higher prices for both conventional crude oil (+4.5%) and synthetic crude oil (+4.9%). This increase is due in part to higher global demand and optimistic market sentiment. In the first half of August, market benchmark prices descended to levels last seen in May, partially on account of uncertainty concerning the Delta variant and possible impacts on economic activity.
Prices for crop products rebounded by 5.9% following a 3.9% drop in June. This was mostly due to an 11.2% price increase in canola. Extreme weather conditions that affected Canadian canola crops were partially responsible for this gain.
Prices for live animals fell by 3.4%, but was 26.0% higher than in July of last year. The monthly decrease was mainly driven by lower prices for hogs (-2.7%) and cattle and calves (-6.1%).
Year over year, the RMPI was up 37.7%. This was mostly driven by higher prices for crude energy products (+66.6%), canola (+84.8%) and live animals (+26.0%).
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. This is particularly 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.
Statistics Canada launched the Producer Price Indexes Portal as part of a suite of portals for prices and price indexes. This web page 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 web page. It provides an introduction to Statistics Canada's producer price indexes—what they are, how they are made, and what they are used for.
The industrial product and raw materials price indexes for August will be released on September 29, 2021.
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).