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Industrial product prices continued decline in July

Ottawa, ON -- The Industrial Product Price Index (IPPI) compiled by Statistics Canada was down 0.5% in July 2012 compared with the previous month. The decline was mainly attributable to chemical products and motor vehicles and other...


Ottawa, ON — The Industrial Product Price Index (IPPI) compiled by Statistics Canada was down 0.5% in July 2012 compared with the previous month. The decline was mainly attributable to chemical products and motor vehicles and other transportation equipment.

The Raw Materials Price Index (RMPI) rose 0.9%, largely because of higher prices for mineral fuels and vegetable products.

The IPPI posted a third consecutive decrease in July, following declines of 0.3% in June and 0.2% in May. Of the 21 major commodity groups, 3 were up while 14 were down.

Chemical products made the largest contribution to the decline in the IPPI, mostly as a result of lower prices for industrial chemical products (-2.5%) and fertilizers (-13.5%). The decrease in fertilizers was led by urea.

The motor vehicles and other transportation equipment group was pushed down by motor vehicles (-1.3%). The increase in the value of the Canadian dollar against the US dollar in July was partly responsible for the decline.

Some Canadian producers who export their products are generally paid on the basis of prices set in US dollars. Consequently, the 1.4% increase in the value of the Canadian dollar relative to the US dollar in July had the effect of reducing the corresponding prices in Canadian dollars. Without the impact of the exchange rate, the IPPI would have fallen 0.2% instead of 0.5%.

Downward pressure on the IPPI also came from primary metal products, especially other non-ferrous metal products, aluminum products and nickel products. In the other non-ferrous metal products group, gold and gold alloys in primary forms and silver and platinum were down.

Conversely, the group with the largest increase in July was fruit, vegetable, feeds and other food products, specifically feeds.

In July, petroleum and coal products had a negligible impact on the IPPI.

Compared with July 2011, the IPPI edged up 0.3%. Therefore, the index continued its year-over-year advance, though the growth rate has slowed in recent months.

The main contributor to the increase in the IPPI was the motor vehicles and other transportation equipment group, specifically motor vehicles (+5.6%). This commodity group has not experienced a year-over-year decline since September 2011.

The 5.8% year-over-year decline in the value of the Canadian dollar against the US dollar contributed to the index’s advance. Without the impact of the exchange rate, the IPPI would have fallen 1.2% instead of increasing 0.3%.

Relative to July 2011, the growth in the IPPI was moderated mainly by primary metal products, especially other non-ferrous metal products, aluminum products and nickel products.

Petroleum and coal products (-3.7%) were also down compared with July 2011. The IPPI excluding petroleum and coal products was up 0.8% during the same period.

Raw Materials Price Index, monthly change

The RMPI rose 0.9% in July, which marks a change in the trend observed over the last five months. Of the seven major commodity groups, three were down.

The increase in the RMPI was mainly a result of mineral fuels (+1.1%), specifically crude oil (+1.2%) as well as vegetable products (+5.1%). The RMPI excluding mineral fuels was up 0.8% in July.

Vegetable products were driven upward primarily by grains, particularly corn and wheat, which posted substantial increases in July. These price increases can be attributed partly to reduced supply in North America, where drought conditions disrupted normal production.

The advance in the RMPI was moderated by lower prices for non-ferrous metals, pushed downward mainly by precious metals, particularly gold and alloys in primary form and silver and platinum.

Raw Materials Price Index, 12-month change

 

Compared with July 2011, the RMPI fell 10.0%. This was the fifth consecutive year-over-year decline.

Downward pressure on the index was exerted mainly by mineral fuels, specifically crude oil (-17.3%). Compared with July 2011, the RMPI excluding mineral fuels was down 3.3%.

Also contributing to the decline in the RMPI were non-ferrous metals, particularly copper concentrates.

Animals and animal products (+4.3%) had a slight moderating effect on the year-over-year decrease in the RMPI.