MRO Magazine

Industrial product prices up for third month in row


Industry

August 31, 2015
By Bill Roebuck
Bill Roebuck

Ottawa – The Industrial Product Price Index (IPPI) from Statistics Canada increased 0.7% in July 2015, mainly because of higher prices for motorized and recreational vehicles. The Raw Materials Price Index (RMPI) declined 5.9% in July, led by lower prices for crude energy products.

Industrial Product Price Index, monthly change

The IPPI (+0.7%) increased for the third consecutive month in July, posting the largest gain since February 2015. Of the 21 commodity groups, 17 were up, 2 were down, and 2 were unchanged.

The main reason for the increase in the IPPI in July was higher prices for motorized and recreational vehicles (+2.5%). The gain was led by increases in passenger cars and light trucks (+2.7%), motor vehicle engines and motor vehicle parts (+2.0%), as well as aircraft (+4.1%). Higher prices for motorized and recreational vehicles were closely linked to the depreciation of the Canadian dollar relative to the US dollar.

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To a lesser extent, higher prices for chemicals and chemical products (+1.1%) and fruit, vegetables, feed and other food products (+0.9%) also contributed to the increase in the IPPI.

Rising prices for petrochemicals (+5.1%) were the main reason for the increase in chemicals and chemical products. Ammonia and chemical fertilizers (+0.7%) and chemical products, not elsewhere classified (+1.0%) also contributed to the increase. Other animal feed (+3.9%) and intermediate food products (+1.1%) were the main contributors to the gain in prices for fruit, vegetables, feed and other food products.

Moderating the increase in the IPPI was a decrease in prices for energy and petroleum products (-1.1%). Lower prices for light fuel oils (-4.1%), diesel fuel (-4.0%) and heavy fuel oils (-5.7%) led the decline. Despite the lower prices for crude oil, motor gasoline edged up 0.3% in July, partly as a result of strong seasonal demand for gasoline in the summer. The IPPI excluding energy and petroleum products increased 1.0%.

Primary non-ferrous metal products (-0.3%) also declined in July, mainly because of lower prices for unwrought copper and copper alloys (-4.2%) and unwrought silver and silver alloys (-3.5%). Higher prices for other unwrought non-ferrous metals and non-ferrous metal alloys (+2.8%) helped moderate the decline.

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 June to July, the Canadian dollar depreciated 4.0% relative to the US dollar, while it was down 19.8% from July 2014. If the exchange rate had remained constant, the IPPI would have decreased 0.2% instead of increasing 0.7%.

Industrial Product Price Index, 12-month change

In July, the IPPI (+0.1%) posted the first year-over-year increase since November 2014, after declining 0.9% in June. The IPPI excluding energy and petroleum products posted its largest gain since September 2011, rising 3.8% year over year.

The year-over-year increase in the IPPI was mainly due to higher prices for motorized and recreational vehicles (+13.3%), specifically passenger cars and light trucks (+14.5%), motor vehicle engines and motor vehicle parts (+9.3%), as well as aircraft (+21.0%). Higher prices were closely linked to the 19.8% year-over-year depreciation of the Canadian dollar relative to the US dollar.

Also contributing to the year-over-year increase in the IPPI were widespread gains for electrical, electronic, audiovisual and telecommunication products (+7.1%). This group was also influenced by the depreciation of the Canadian dollar.

Prices for meat, fish, and dairy products rose 2.8%, mainly as a result of higher prices for fresh and frozen beef and veal (+18.1%), while lower prices for fresh and frozen pork (-7.0%) moderated the gain.

Lower prices for energy and petroleum products (-18.6%), specifically motor gasoline (-15.1%), diesel fuel (-23.7%), light fuel oils (-21.5%) and heavy fuel oils (-34.9%), moderated the year-over-year increase in the IPPI.

Also moderating the increase, but to a lesser extent, were lower prices for chemicals and chemical products (-3.4%). The main reason for the decline in chemicals and chemical products was lower prices for petrochemicals (-23.9%), while higher prices for ammonia and chemical fertilizers (+13.1%) moderated the year-over-year decrease.

Raw Materials Price Index, monthly change

The RMPI fell 5.9% in July, following a 0.2% gain in June. Of the six commodity groups, two were up, three were down, and one was unchanged.

Lower prices for crude energy products (-13.0%) were the main reason for the decline in the RMPI, led by conventional crude oil (-13.5%), which posted its largest decline since January 2015, when prices fell 20.1%. The RMPI excluding crude energy products decreased 0.3%.

Also contributing to the decline, but to a much lesser extent, were lower prices for animals and animal products (-1.4%), primarily due to a decrease in cattle and calves (-3.7%).

Slightly moderating the decline in the RMPI in July were higher prices for crop products (+2.9%). Increases in the price of other crop products (+3.5%), wheat (+3.6%) and canola (+3.7%) were the main reason for the gain.

Raw Materials Price Index, 12-month change

The RMPI fell 21.2% over the 12-month period ending in July, following a 17.3% decline in June.

Lower prices for crude energy products (-37.9%) were largely responsible for the decline, specifically conventional crude oil (-38.6%). The RMPI excluding crude energy products fell 2.7% from the same month last year.

Also contributing to the year-over-year decline of the RMPI were lower prices for metal ores, concentrates and scrap (-5.8%).