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Industrial product price index sees rebound in April

Ottawa, ON -- The Industrial Product Price Index (IPPI) increased 0.3% in April 2010, mainly as a result of hi...


Ottawa, ON — The Industrial Product Price Index (IPPI) increased 0.3% in April 2010, mainly as a result of higher prices for primary metal products, reports Statistics Canada. The Raw Materials Price Index (RMPI) rose 1.7%, largely led by higher prices for mineral fuels, particularly crude oil.

The IPPI rebounded with an increase of 0.3% in April, following a 0.4% decline in March. The Index has generally been on an upward trend since November 2009.

The April IPPI advance was mainly driven by higher prices for primary metal products (+3.7%). Prices of all primary metal products increased, particularly nickel products (+13.4%), as a result of lower nickel production as well as strong demand from stainless steel producers.

On the other hand, the IPPI increase was dampened mainly by lower prices for motor vehicles and other transportation equipment, which fell 1.1% in April, largely as a result of the 1.8% appreciation of the Canadian dollar relative to the US dollar. To a lesser extent, the increase in the IPPI was moderated by lower prices for electrical and communications products (-0.7%), pulp and paper products (-0.4%) as well as machinery and equipment (-0.4%).

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. If the exchange rate used to convert these prices had remained unchanged, the IPPI would have risen 0.7% instead of 0.3%.

Excluding petroleum and coal prices, the IPPI increase would have remained unchanged at 0.3% in April.

The IPPI was down 0.4% in April compared with the same month a year earlier, a slower pace than the 1.2% decrease in March. The index has been posting consecutive year-over-year declines since March 2009, with the largest occurring in July 2009 (-7.1%).

The decrease in the IPPI over the past 12 months was led mainly by motor vehicles and other transportation equipment (-11.5%). Other commodities made smaller contributions to the decline, including pulp and paper products (-8.0%), electrical and communication products (-6.8%), and machinery and equipment (-5.2%).

On the other hand, rising prices for petroleum and coal products (+25.5%) and primary metal products (+11.1%) moderated the year-over-year decline of the IPPI in April.

Between April 2009 and April 2010, prices for products excluding petroleum and coal were down 2.7%, smaller than the 3.7% decline observed in March. The IPPI excluding petroleum and coal has posted year-over-year decreases beginning in June 2009. The largest year-over-year decline since June 2009 was in October 2009 (-4.8%).

Since April 2009, the Canadian dollar has appreciated 21.8% in value relative to its US counterpart, and if the direct effect of the exchange rate had been excluded, the IPPI would have increased 4.2% instead of declining 0.4%.

The Raw Materials Price Index (RMPI) increased 1.7% in April, following gains of 0.4% in February and 0.8% in March. The upward trend that began in January 2009 is continuing, sustained by rising prices for mineral fuels and non-ferrous metals.

In April, the RMPI advance was mainly a result of rising prices for mineral fuels, particularly crude oil. After increasing 5.6% in January, crude oil prices posted gains of 2.1% in February and 1.4% in both March and April.

The 3.0% increase in prices for non-ferrous metals also contributed to the advance of the RMPI in April, led mainly by copper and nickel concentrates (+9.2%). Most of the products in the non-ferrous metals group were up, except for non-ferrous metal scraps and radioactive concentrates. The demand for metals was bolstered by stronger economic activity.

Excluding mineral fuels, the RMPI increased 2.0% in April, following a 0.4% gain in March. In April, five of the seven major groups posted increases while the other two groups had no change.

From April 2009 to April 2010, raw materials prices rose 17.3%, following an upward trend that began in November 2009. Crude oil prices (+37.8%) and non-ferrous metals (+23.1%) in April were the main contributors to the year-over-year RMPI advance. Ferrous materials (+13.5%) played a small role in the RMPI increase. All other groups posted declines.

The industrial product and raw material price indexes for May will be released by Statistics Canada on June 29, 2010.