DAILY NEWS May 30, 2014 12:17 PM - 0 comments

Dropping metals prices affect overall industrial index

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2014-05-30

Ottawa - The Industrial Product Price Index (IPPI) declined 0.2% in April 2014, mainly because of lower prices for primary non-ferrous metal products, according to Statistics Canada. The Raw Materials Price Index (RMPI) increased 0.1%, led by animals and animal products.

Industrial Product Price Index, monthly change

The IPPI declined 0.2% in April, after rising 0.4% in March. This was the first decline in the IPPI since October 2013. Of the 21 major product groups, 2 were up, 15 were down and 4 were unchanged.

The decrease of the IPPI was mainly attributable to lower prices for primary non-ferrous metal products (-1.9%). Unwrought precious metals and precious metal alloys (-4.2%) was the main reason for the decline in this commodity group. This was the largest decrease for unwrought precious metals and precious metal alloys since July 2013. After peaking in September 2011, unwrought precious metals and precious metal alloys have generally been trending downwards. Over the 31-month period since that peak, unwrought precious metals and precious metal alloys have declined 30.3%.

The IPPI was moderated by higher prices for meat, fish, and dairy products (+2.5%). Fresh and frozen pork (+7.9%) increased for the fourth consecutive month and was the main reason for the increase in this commodity group. The rise in fresh and frozen pork was mainly attributable to higher prices for hogs.

Motorized and recreational vehicles (-0.6%) declined for the first time since September 2013, led by lower prices for passenger cars and light trucks (-0.7%), motor vehicle engines and motor vehicle parts (-0.5%), as well as aircraft (-1.0%). The decline in motorized and recreational vehicle prices was closely linked to the appreciation of the Canadian dollar relative to the US dollar.

Chemicals and chemical products (-0.6%) declined for the second consecutive month, led by lower prices for petrochemicals (-4.4%). Plastic resins rose by 1.8% in April, moderating the decline for chemicals and chemical products.

To a lesser extent, energy and petroleum products (-0.2%) declined for the first time since October 2013, primarily as a result of lower prices for natural gas liquids and related products (-14.0%).

Some Canadian producers who export their products report their prices in US dollars. Consequently, the 1.1% increase in the value of the Canadian dollar relative to the US dollar may have had the effect of decreasing the IPPI. Without the measurable effect of the exchange rate, the index would have risen 0.1% instead of decreasing 0.2%.

Industrial Product Price Index, 12-month change

The IPPI increased 3.9% during the 12-month period ending in April, after rising 3.0% in March.

Compared with April 2013, the growth of the IPPI was mainly attributable to energy and petroleum products (+9.5%), specifically diesel fuel (+13.4%), light fuel oils (+13.3%) and motor gasoline (+10.9%). The IPPI excluding energy and petroleum products rose 2.8% on a year-over-year basis.

Motorized and recreational vehicles (+4.9%) also contributed to the year-over-year increase in the IPPI, as a result of higher prices for passenger cars and light trucks (+5.3%), motor vehicle engines and motor vehicle parts (+3.3%) and aircraft (+9.6%). On a year-over-year basis, prices for motorized and recreational vehicles have been on an upward trend since July 2013.

Compared with April 2013, meat, fish, and dairy products rose 10.4%, mainly as a result of higher prices for fresh and frozen pork (+47.9%).

To a lesser extent, chemicals and chemical products (+4.9%) and primary ferrous metals (+7.3%) also contributed to the year-over-year increase in the IPPI.

The gain in chemicals and chemical products was mostly a result of higher prices for petrochemicals (+6.3%), ammonia and chemical fertilizers (+13.4%) as well as plastic resins (+10.6%).

The year-over-year advance of primary ferrous metal products (+7.3%) was led by higher prices for iron and steel basic shapes (+10.6%) as well as wire and other rolled and drawn steel products (+9.0%).

Raw Materials Price Index, monthly change

The RMPI edged up 0.1% in April, after rising 0.7% in March. It was the fifth consecutive monthly increase. Of the six major commodity groups, two were up and four were down.

The increase of the RMPI was mainly attributable to higher prices for animals and animal products (+4.4%), which posted a fourth straight monthly gain. Live animals (+7.1%), in particular hogs (+14.1%), were responsible for the increase in the animals and animal products group. The upward trend in hog prices that began in January 2014 is partly due to the porcine epidemic diarrhea virus.

To a lesser extent, crop products (+1.0%) also contributed to the increase of the RMPI, largely because of higher prices for other crop products (+1.1%) and canola (+2.8%).

Conversely, the increase of the RMPI was moderated mostly by crude energy products (-0.8%), down for a second consecutive month. Lower prices for conventional crude oil (-0.9%) led the decline for this commodity group. The RMPI excluding crude energy products increased 1.2% in April.

Metal ores, concentrates and scrap also moderated the increase in the RMPI, down 1.4% compared with March.

Raw Materials Price Index, 12-month change

The RMPI increased 9.1% during the 12-month period ending in April, after advancing 6.5% in March.

Compared with April 2013, the increase in the RMPI was mainly attributable to higher prices for crude energy products (+13.5%), particularly conventional crude oil (+13.6%). The RMPI excluding crude energy products was up 4.5% on a year-over-year basis.

To a lesser extent, animals and animal products (+18.1%) also contributed to the year-over-year increase in the RMPI, primarily because of higher prices for live animals (+31.7%), particularly hogs (+64.5%).

Conversely, the growth of the RMPI over a 12-month period was moderated by crop products (-4.7%) as well as metal ores, concentrates and scrap (-1.9%).

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