Nine months of gains end in May for Industrial Product Price Index
Ottawa, ON -- In May 2011, the Industrial Product Price Index (IPPI) edged down 0.2% while the Raw Materials Price Index (RMPI) fell 5.2% compared with April 2011, according to Statistics Canada. The major contributors to the declines were...
Ottawa, ON — In May 2011, the Industrial Product Price Index (IPPI) edged down 0.2% while the Raw Materials Price Index (RMPI) fell 5.2% compared with April 2011, according to Statistics Canada. The major contributors to the declines were metals in the case of the IPPI and petroleum for the RMPI.
The decrease in the IPPI ended nine consecutive monthly gains. The contraction of the IPPI in May was largely a result of lower prices for primary metal products (-2.8%). Petroleum and coal products (-0.9%) as well as lumber and other wood products (-1.6%) contributed more modestly to the IPPI decline.
Prices for primary metal products fell in May, mainly as a result of a decrease in precious metals, led by precious metal basic manufactured shapes (-26.1%) and silver and platinum products (-7.5%). Silver prices lost much of the gains made in April, contributing to the decline in the prices of precious metals in May. In contrast, the price of gold continued to rise, as demand remained high because of continued sustained demand for this metal.
All metals were down, with the exception of aluminum. World demand for industrial metals declined, while inventories grew.
Prices for petroleum and coal products fell 0.9% in May, following increases of 8.2% in March and 4.2% in April. The decline in May was partly a result of lower than expected growth forecasts for the United States.
The IPPI decline in May was moderated by higher prices for chemical products (+2.1%) and motor vehicles and other transport equipment (+0.7%). The increase in chemical products was entirely attributable to organic chemicals (+8.9%), while the advance in motor vehicle prices resulted largely from the 1.0% depreciation in the Canadian dollar against the American dollar.
Some Canadian producers who export their products to the United States are generally paid on the basis of prices set in US dollars. Consequently, the weakening of the Canadian dollar in relation to the US dollar had the effect of increasing the corresponding prices in Canadian dollars. Without the impact of the exchange rate, the IPPI would have fallen 0.4% instead of 0.2%.
In May, excluding petroleum and coal prices, the IPPI would have edged down 0.1% for the second consecutive month.
12-month change in the IPPI: Increase in May weaker than the previous month
The IPPI rose 4.5% in May compared with the same month a year earlier, after advancing 5.1% in March and 5.0% in April. Of the 21 major commodity aggregations, 15 were up and 6 declined.
Compared with May 2010, the IPPI advance was driven mainly by higher prices for petroleum and coal products (+31.2%) and primary metal products (+11.7%).
Year over year, petroleum and coal products remained on an upward trend, posting gains since November 2009.
The largest contributors to the increase in primary metal products were precious metals, particularly silver and platinum (+79.4%), as well as precious metal basic manufactured shapes (+49.0%). Copper and aluminum products contributed more modestly to the increase, advancing 22.5% and 10.1% respectively.
Chemical products (+6.8%) and fruits, vegetables and feeds (+6.6%) made smaller contributions to the IPPI advance in May.
In May, the 7.4% year-over-year increase in the value of the Canadian dollar relative to the US dollar slowed the IPPI advance. Without the impact of the exchange rate, the IPPI would have risen 6.1% instead of 4.5%.
Prices for motor vehicles and other transport equipment, which are particularly sensitive to the exchange rate, fell 3.7% in May compared with the same month a year earlier, continuing the downward movement that started in October 2009.
Excluding petroleum and coal prices, the year-over-year IPPI would have increased 1.4% in May, slower than the growth rates observed from January to April, which ranged from 2.1% and 2.7%. On a year-over-year basis, the IPPI has been rising since May 2010.
Raw Materials Price Index: First decline after seven consecutive monthly increases
The Raw Materials Price Index (RMPI) fell 5.2% in May, following advances of 5.8% in March and 6.9% in April. The decrease in May ended a series of seven consecutive monthly gains.
The RMPI decline in May was led mainly by mineral fuels (-8.4%). Crude oil fell 8.9%, following substantial increases of 16.2% in March and 14.1% in April. Crude oil prices fell in May as a result of high inventory levels in the United States, the general state of the world economy, and weaker seasonal demand by refineries. At this time of year, refineries suspend production for maintenance.
All major commodity groups declined in May except non-metallic minerals, which registered no change. Apart from mineral fuels, the largest contributors to the RMPI’s decrease were non-ferrous metals (-2.3%), vegetable products (-2.6%) and animals and animal products (-1.2%).
The decline in non-ferrous metals in May was primarily attributable to lower prices for zinc concentrates (-6.0%) and copper and copper alloys scrap (-4.0%). Metal prices were affected by weaker demand from Asia and an increase in inventories and supply.
Lower prices for vegetable products was mainly a result of a decline in natural rubber and allied gums (-12.0%), with weaker Asian demand having a significant impact on the prices of these products.
Excluding mineral fuels, the RMPI would have declined 1.9% in May, following a 1.0% advance in April.
Compared with the same month a year earlier, the RMPI was up 25.4% in May, continuing the upward trend that began in November 2009. The main contributors to the RMPI year-over-year increase in May were mineral fuels (+37.0%), non-ferrous metals (+22.5%), vegetable products (+40.1%) and animals and animal products (+5.8%).
Year over year, if mineral fuels were excluded, the RMPI would have risen 15.6% in May, similar to the growth rate in April.