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Industrial product prices continue to decline

OTTAWA, ON -- Prices for manufactured goods at the plant gate continued to decline in November 2004, posting their...


OTTAWA, ON — Prices for manufactured goods at the plant gate continued to decline in November 2004, posting their largest monthly drop since May 2003, reports Statistics Canada in its latest report of industrial product and raw materials price indexes. Raw materials prices also receded compared with October 2004, as prices were down for crude oil.

Prices charged by manufacturers, as measured by the Industrial Product Price Index (IPPI), fell for the third month in a row on a monthly basis. Lower prices for motor vehicles, petroleum, lumber, and pulp and paper products were the main sources of the monthly decline.

The 12-month change in the IPPI was 4.1%, down from October’s increase of 5.5%.

The Raw Materials Price Index (RMPI) fell 5.3% from October to November, a noticeable about-face compared with the 4.1% increase registered the month before. There were price declines in mineral fuels, wood products, vegetable products, animals and animal products, and ferrous materials.

Raw materials cost factories 19.7% more compared with November 2003. This was down from the 12-month rise of 28.4% in October.

The IPPI (1997=100) stood at 108.5 in November, down from its revised level of 110.4 in October. The RMPI (1997=100) reached 131.9, down from a revised level of 139.3 in October.

On a month-over-month basis, manufacturers’ prices fell 1.7% following a 0.4% drop in October.

Prices for motor vehicles and other transport equipment declined 2.8%, mainly because of a stronger Canadian dollar. Petroleum and coal products prices decreased as gasoline and fuel oil prices dropped 4.7%.

Lumber and other wood products were down 4.3% due to high levels of supply. Prices for pulp and paper products fell 2.5%, mainly due to higher inventory levels for pulp.

Electrical and communication products, meat, fish and dairy products, primary metal products, fruit, vegetable and feed products, chemical products as well as machinery and equipment also contributed to the decrease in November.

On a 12-month basis, the IPPI was up 4.1% in November. Prices for petroleum and coal products continued to have a major influence on the 12-month change, rising 36.9% from November 2003. If petroleum and coal product prices had been excluded, the IPPI would have increased only 1.8%, rather than 4.1%.

Prices for primary metal products also had a big impact on the increase, rising 21.2% from November 2003. Primary steel, copper and nickel products were the major contributors.

Metal fabricated products increased 13.4%, mainly as a result of higher raw material costs. Chemical products, rubber, leather and plastic fabricated products, pulp and paper products, non-metallic mineral products as well as furniture and fixtures also contributed to the 12-month increase in the IPPI.

These increases were partly offset by lower prices for motor vehicles and other transport equipment, which were down 4.8% from November 2003. Price decreases were also observed for fruit, vegetable and feed products; meat, fish and dairy products; lumber products; and electrical and communication products.

On a monthly basis, raw materials prices fell 5.3% in November. Mineral fuels were down compared with October, as crude oil prices declined 10.8% due to higher inventories and increased production.

Prices for wood products decreased 4.1% due to lower prices for softwood logs and bolts. Vegetable products declined 1.6% as prices were down for corn, wheat and barley. Higher crop production and lower demand are the main reasons for the decrease. Animals and animal products declined as prices for hogs for slaughter dropped 4.7%. Decreases were also observed for ferrous materials.

On a 12-month basis, the price of raw materials were up 19.7% in November, but down from the 28.4% increase posted in October. Mineral fuels were up 36.6% with crude oil prices rising 46.8%. If mineral fuels had been excluded, the RMPI would have increased only 6.5% instead of 19.7%.

Prices manufacturers paid for non-ferrous metals rose 20.6%, mainly because of higher prices for radioactive concentrates, copper, lead, zinc and silver. Ferrous materials prices rose 36.6% from November 2003, with iron and steel scrap prices rising 57.8%.

Other major contributors to the 12-month increase were higher prices for animals and animal products as well as non-metallic minerals.

IMPACT OF THE EXCHANGE RATE

Between October and November, the value of the Canadian dollar strengthened 4.2% against the US dollar.

As a result, if the impact of the exchange rate had been excluded, the IPPI would have fallen 0.6% compared with the actual 1.7% decline.

On a 12-month basis, if the impact of the exchange rate had been excluded, producer prices would have risen 6.5% between November 2003 and November 2004, rather than their actual 4.1% increase.

PRICES FOR INTERMEDIATE GOODS DOWN

Prices for intermediate goods decreased 1.6% from October. Lower prices for lumber products; petroleum products; pulp and paper products; motor vehicles; primary metal products; chemical products; electrical and communication products; meat, fish and dairy products; and fruit, vegetable and feed products were the major contributors to the decrease.

Producers of intermediate goods received 7.1% more for their goods in November 2004 than in November 2003, down from the 8.7% increase in October. Higher prices for petroleum products; primary metal products; metal fabricated products; chemical products; pulp and paper products; and rubber, leather and plastic products were mainly responsible for the annual increase.

These increases were partly offset by declining prices for fruit, vegetable and feed products; motor vehicles; lumber products; meat, fish and dairy products; and electrical and communication products.

FINISHED GOODS PRICES DECLINE

On a monthly basis, prices for finished goods were down 1.9% from October. Lower prices for motor vehicles; petroleum products; meat, fish and dairy products; electrical and communication products; machinery and equipment; and lumber products were responsible for this monthly decline.

Compared with November 2003, prices for finished goods were down by 0.3%. Lower prices for motor vehicles; meat, fish and dairy products; electrical and communication products; lumber products; and machinery and equipment were the major contributors to the annual decline.

Higher prices for petroleum products; fruit, vegetable and feed products; chemical products; furniture and fixtures; tobacco products; beverages; and rubber, leather and plastic products partly offset the annual decrease.