MRO Magazine

Manufactured goods prices finally see upturn

Ottawa, ON -- Monthly prices for manufactured goods at the factory gate rose in December 2005 for the first time si...


Industry

January 28, 2005
By MRO Magazine
MRO Magazine

Ottawa, ON — Monthly prices for manufactured goods at the factory gate rose in December 2005 for the first time since August, reports Statistics Canada in its latest industrial product and raw materials price indexes. Meanwhile, raw materials prices declined for the second month in a row, as prices for crude oil continue to fall.

Prices charged by manufacturers, as measured by the Industrial Product Price Index (IPPI), rose 0.3% after three consecutive months of declines. Higher prices for motor vehicles, lumber, and pulp and paper products were the main sources of the monthly increase.

The 12-month change in the IPPI was 3.8%, unchanged from November’s increase.

The Raw Materials Price Index (RMPI) fell 4.3% in December from a month earlier, following a 5.2% decrease in November. There were price declines in mineral fuels, ferrous materials, wood products, and non-metallic minerals.

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Compared with December 2003, raw materials cost factories 11.6% more. This was down from the 12-month rise in November (+19.8%) and October (+28.3%).

In December, the IPPI (1997=100) stood at 108.5, up from its revised level of 108.2 in November. The RMPI (1997=100) reached 126.3, down from a revised level of 132.0 in November.

MONTHLY INCREASE DUE TO MOTOR VEHICLES, LUMBER, AND PULP AND PAPER PRODUCTS

On a month-over-month basis, manufacturers’ prices rose 0.3% following a 2.0% decrease in November.

Prices for motor vehicles and other transport equipment increased 1.2%, mainly because of a weaker Canadian dollar. Lumber and other wood products were up 4.2% due to tight supply and increased demand. Prices for pulp and paper products rose 0.7% mainly due to a limited supply for pulp.

Meat, fish and dairy products, electrical and communication products, machinery and equipment, rubber, leather and plastic products as well as fruit, vegetable and feed products also contributed to the increase in December.

Petroleum and coal products prices fell as gasoline and fuel oil prices dropped 6.6% compared with November.

PETROLEUM AND PRIMARY METALS CONTINUE TO BE MAJOR FACTORS IN THE 12-MONTH CHANGE

On a 12-month basis, the IPPI was up 3.8% in December. Prices for petroleum and coal products continued to have a major influence on the 12-month change, rising 25.6% from December 2003. If petroleum and coal product prices had been excluded, the IPPI would have increased only 2.3% rather than 3.8%.

Prices for primary metal products also had a big impact on the increase in the IPPI, rising 16.6% from December 2003. Primary steel, copper and nickel products were the major contributors to the advance.

Metal fabricated products increased 11.8%, as the cost for raw material remained high. Chemical products, lumber and other wood products, rubber, leather and plastic fabricated products, as well as pulp and paper products 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 4.0% from December 2003. Price decreases were also observed for fruit, vegetable and feed products and meat, fish and dairy products.

PRICES CONTINUE TO WEAKEN IN DECEMBER

On a monthly basis, raw materials prices fell 4.3% in December. Mineral fuels were down compared with November, as crude oil prices declined 11.4% mainly due to higher inventories.

Ferrous materials decreased 5.5% from November as iron and steel scrap prices were down 8.3%. Prices for wood products decreased 0.5% due to lower prices for softwood logs and bolts. Decreases were also observed for non-metallic minerals.

Animals and animal products increased 2.1% as higher prices were observed for cattle for slaughter (+7.4%), hogs for slaughter (+2.3%) as well as poultry (+2.9%). Prices for non-ferrous metals were up 2.6% from November mainly due to higher prices for zinc and copper concentrates. Prices for vegetable products also rose 0.5% as prices were up for wheat, barley and coffee.

On a 12-month basis, the price of raw materials rose 11.6% in December, a smaller increase than in November (+19.8%). Mineral fuels were up 19.6% with crude oil prices rising 24.7%. If mineral fuels had been excluded, the RMPI would have increased only 5.3% instead of 11.6%.

Prices manufacturers paid for non-ferrous metals rose 17.1%, mainly because of higher prices for radio-active concentrates, copper, lead, and zinc. Ferrous materials prices rose 24.8% from December 2003, with iron and steel scrap prices rising 37.7%.

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

These increases were partly offset by lower prices for vegetable products and wood products.

IMPACT OF THE EXCHANGE RATE

Between November and December, the value of the Canadian dollar fell 1.9% against the US dollar.

As a result, if the impact of the exchange rate had been excluded, the IPPI would have fallen 0.3% compared with the actual 0.3% increase.

On a 12-month basis, if the impact of the exchange rate had been excluded, producer prices would have risen 5.9% between December 2003 and December 2004, rather than their actual 3.8% increase.

PRICES FOR INTERMEDIATE GOODS INCREASE

Prices for intermediate goods increased 0.2% from November. Higher prices for lumber products; motor vehicles; pulp and paper products; meat, fish and dairy products; electrical and communication products; chemical products; and rubber, leather and plastic products were the major contributors to the increase.

Lower prices for petroleum and coal products, primary metal products and metal fabricated products partially offset the monthly increase.

Producers of intermediate goods received 6.7% more for their goods in December 2004 than in December 2003, down from the 8.8% increase registered in November. Higher prices for petroleum products; primary metal products; metal fabricated products; chemical products; lumber 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; meat, fish and dairy products; and tobacco products.

FINISHED GOODS PRICES INCREASE IN DECEMBER

On a monthly basis, prices for finished goods were up 0.3% from November. Higher prices for motor vehicles; meat, fish and dairy products; electrical and communication products; machinery and equipment; and lumber products were responsible for this monthly rise.

Compared with December 2003, prices for finished goods were down 0.3%. Lower prices for motor vehicles and meat, fish and dairy products were the major contributors to the annual decline.

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

LOOKING BACK AT 2004

For 2004, manufacturers received an average of 3.1% more for their products than in 2003, a notable turnaround from the 1.3% decline in 2003.

The main contributors to this increase were petroleum and coal products (+17.0%), primary metal products (+17.9%), metal fabricated products (+9.0%) and lumber and other wood products (+12.2%).

Motor vehicles and other transport equipment prices fell 4.6% on average in 2004. This decrease was mainly the result of a stronger Canadian dollar.

The value of the Canadian dollar rose 7.5% against the US dollar on average in 2004. If the impact of the exchange rate had been excluded, the annual IPPI would have risen 5.1% rather than the actual 3.1% increase.

Raw materials prices were up an average of 11.8% in 2004 compared with the 2.0% increase in 2003. Most of the upward pressure came from higher prices for mineral fuels with crude oil p
rices rising 21.8% on average in 2004. Other major contributors to the annual average increase were ferrous materials (+30.9%) and non-ferrous metals (+27.8%).