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Decline in energy prices leads to lower industrial product prices


April IPPI chart

For reference, the lighter blue line shows the Industrial Product Price Index excluding energy and petroleum products.

Ottawa – Statistics Canada’s Industrial Product Price Index (IPPI) declined 0.9% in April 2015, mainly because of lower prices for energy and petroleum products. The Raw Materials Price Index (RMPI) increased 3.8%, largely as a result of higher prices for crude energy products.

Industrial Product Price Index, monthly change

The IPPI declined 0.9% in April, following a 0.2% increase in March. Of the 21 commodity groups, 17 were down, two were up and two were unchanged.

The main reason for the decline in April was lower prices for energy and petroleum products (-3.2%). The decline was led by lower prices for diesel fuel (-8.7%) and light fuel oils (-5.6%), while motor gasoline edged down 0.6%.

Both motor gasoline and diesel fuel are commonly used as transportation fuels; however, prices for diesel fuel may vary as it is also used as a heating fuel. The demand for diesel fuel typically declines outside winter months, which can put downward pressure on prices.

The IPPI excluding energy and petroleum products declined 0.6%. This was the first decrease in the IPPI excluding energy and petroleum products since May 2014.

Motorized and recreational vehicles (-1.5%) also contributed to the decline in the IPPI. Lower prices for passenger cars and light trucks (-1.5%) were the main reason for the decrease and, to a lesser extent, lower prices for motor vehicle engines and motor vehicle parts (-1.2%) as well as aircraft (-2.3%). Lower prices for motorized and recreational vehicles were closely linked to the appreciation of the Canadian dollar relative to the US dollar.

Both primary non-ferrous metal products (-0.8%) and primary ferrous metal products (-1.4%) declined in April.

Lower prices for unwrought precious metals and precious metal alloys (-0.7%), and other unwrought non-ferrous metals and non-ferrous metal alloys (-2.2%) were the main reasons for the decline in primary non-ferrous metal products. Lower prices for basic and semi-finished iron and steel products (-1.4%) led the decline in primary ferrous metal products.

To a lesser extent, lower prices for fruit, vegetables, feed and other food products (-0.6%) also contributed to the decline in the IPPI. The decrease was led by lower prices for flour and other grain mill products (-3.2%), grain and oilseed products, not elsewhere classified (-0.8%) as well as other animal feed (-1.3%).

Some IPPI prices are reported in US dollars and are converted to Canadian dollars using the average monthly exchange rate. Consequently, any change in the value of the Canadian dollar relative to the US dollar will affect the level of the index. From March to April 2015, the Canadian dollar appreciated 2.3% relative to the US dollar. This was the first appreciation of the Canadian dollar since July 2014. If the exchange rate had remained constant, the IPPI would have declined 0.4% instead of decreasing 0.9%.

Industrial Product Price Index, 12-month change

The IPPI declined 2.4% over the 12-month period ending in April, after falling 1.8% in March.

Compared with April 2014, the decline in the IPPI was largely a result of lower prices for energy and petroleum products (-25.8%). Motor gasoline (-27.1%) and, to a lesser extent, diesel fuel (-28.7%) as well as light fuel oils (-23.1%), were the primary reasons for the decline in this commodity group. Excluding energy and petroleum products, the IPPI increased 2.4% over the last 12 months.

Also contributing to the decline were lower prices for chemicals and chemical products (-6.5%). The decrease in this commodity group was led by aromatic hydrocarbon gases (-31.9%), as well as liquefied refinery gases, and acyclic hydrocarbons not elsewhere classified (-29.8%).

The year-over-year decline in the IPPI was moderated by a gain in motorized and recreational vehicles (+8.7%). The increase was mainly due to higher prices for passenger cars and light trucks (+9.2%) and, to a lesser extent, motor vehicle engines and motor vehicle parts (+6.2%) and aircraft (+13.7%).

Also moderating the year-over-year decline in the IPPI were higher prices for primary non-ferrous metal products (+3.3%), specifically, aluminum and aluminum-alloy basic and semi-finished products (+15.8%) and unwrought aluminum and aluminum alloys (+9.0%).

Raw Materials Price Index, monthly change

The RMPI rose 3.8% in April, following a 1.5% decline in March. Of the six commodity groups, two were up, three were down and one was unchanged.

The gain was attributable to higher prices for crude energy products (+9.9%), specifically conventional crude oil (+10.3%). The RMPI excluding crude energy products declined 0.3%.

Lower prices for crop products (-1.5%) moderated the increase, mainly other crop products (-1.9%) and, to a lesser extent, wheat (-2.2%).

Metal ores, concentrates and scrap was unchanged in April despite a 12.4% decline in prices for iron ores and concentrates. Prices for iron ores and concentrates have generally declined for over a year and have fallen 55.7% since December 2013.

Raw Materials Price Index, 12-month change

The RMPI fell 20.9% in the 12-month period ending in April, following a 23.7% decline in March.

The decrease was largely attributable to crude energy products (-36.7%), specifically conventional crude oil (-37.4%). The RMPI excluding crude energy products declined 2.8% from the same period last year.

Also contributing to the decline, but to a much lesser extent, was metal ores, concentrates and scrap (-3.1%).


Bill Roebuck

Bill Roebuck

Bill Roebuck is the Editor and Associate Publisher of Machinery & Equipment MRO magazine and mromagazine.com.
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