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Industrial product prices affected by US dollar in August

Ottawa, ON -- The Industrial Product Price Index (IPPI) increased 0.4% in August 2010 compared with July, led ...


Ottawa, ON — The Industrial Product Price Index (IPPI) increased 0.4% in August 2010 compared with July, led by primary metal products, according to Statistics Canada. The Raw Materials Price Index (RMPI) rose 2.2%, mainly as a result of higher prices for non-ferrous metals.

The increase in August follows no change in the IPPI in July and a 0.9% decline in June. Among the 21 major product groups, 10 posted gains, five decreased and the others remained unchanged.

The IPPI advance in August was mostly led by higher prices of primary metal products (+3.3%) and to a lesser extent by petroleum and coal products (+0.4%). The increase in primary metal products was a result of strong demand as well as interruptions in production.

Lower prices of pulp and paper products (-0.4%) as well as rubber, leather and plastic fabricated products (-0.5%) moderated the IPPI increase.

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 value of the Canadian dollar in relation to the US dollar has the effect of reducing or increasing the corresponding prices in Canadian dollars. In August, however, the 0.1% increase in the value of the Canadian dollar relative to the US currency had an insignificant influence on the IPPI.

Excluding petroleum and coal prices, the IPPI rose 0.3% in August, following a 0.1% increase in July.

12-MONTH CHANGE IN THE IPPI: GROWTH CONTINUES

The IPPI was up 0.6% in August compared with the same month a year earlier, following a 0.8% increase in July. Starting in January 2010, the IPPI registered positive year-over year changes with the exception of a 0.7% decline in March.

In the last 12 months, the IPPI advance was mostly a result of higher prices for primary metal products (+6.9%) and, to a lesser extent, chemicals and chemical products (+2.9%), pulp and paper products (+3.2%) as well as rubber, leather and plastic fabricated products (+3.1%).

The 4.5% appreciation of the Canadian dollar relative to the US dollar moderated the IPPI year-over-year advance in August. Prices of motor vehicles and other transportation equipment, which are particularly influenced by the exchange rate, fell 2.1% in August, the smallest year-over-year decrease since October 2009 (-6.5%), the month in which this index started its negative year-over-year movement.

Between August 2009 and August 2010, the IPPI excluding petroleum and coal rose 0.6%, following a 0.3% advance in July. This was its fourth consecutive year-over-year increase.

RAW MATERIALS PRICE INDEX: SECOND CONSECUTIVE MONTHLY INCREASE

The Raw Materials Price Index (RMPI) rose 2.2% in August, following a 1.9% advance in July.

In August, higher prices for non-ferrous metals (+6.3%) and mineral fuels (+1.3%) were the main factors in the RMPI growth. Higher prices of vegetable products (+3.1%) as well as animal and animal products (+1.5%) had a smaller contribution to the RMPI increase.

Excluding mineral fuels, the RMPI increased 2.9% in August compared with a 1.8% increase in July.

Between August 2009 and August 2010, the RMPI was up 5.0%, following a 6.8% advance in July. The year-over-year RMPI has been on an upward trend since November 2009. Non-ferrous metals (+9.2%), animal and animal products (+8.8%) and mineral fuels (+2.3%) were the main contributors to the year-over-year RMPI advance in August. Ferrous materials (+19.1%), vegetable products (+5.6%) and non-metallic minerals (+4.2%) played a smaller role in the RMPI increase.

The industrial product and raw material price indexes for September 2010 will be released on October 29, 2010.