MRO Magazine

Industrial product prices declined 0.4% over year to August


Industry

September 29, 2015
By Bill Roebuck
Bill Roebuck

Ottawa – The Industrial Product Price Index (IPPI) declined 0.3% in August 2015, mainly as a result of lower prices for energy and petroleum products, reports Statistics Canada. The Raw Materials Price Index (RMPI) declined 6.6% in August, led by lower prices for crude energy products.

Industrial Product Price Index, monthly change

The IPPI (-0.3%) declined in August, after increasing 0.7% in July. Among the 21 major commodity groups, the declines were isolated as two groups were down, 17 were up and two were unchanged.

The main reason for the decline in the IPPI in August was lower prices for energy and petroleum products (-4.7%), led by lower prices for motor gasoline (-5.7%), light fuel oils (-6.8%) and diesel fuel (-5.1%). This was the largest decline for energy and petroleum products since January 2015, when prices fell 11.1%. The widespread declines for refined petroleum products correspond with a 26.8% fall in the price of conventional crude oil since June 2015, putting downward pressure on prices. The IPPI excluding energy and petroleum products increased 0.4%.

Advertisment

Also contributing to the decline in the IPPI were lower prices for chemicals and chemical products (-1.7%). The decrease was almost entirely attributable to lower prices for petrochemicals (-11.5%), which posted its largest decline since January 2015.

Largely moderating the decline in the IPPI were higher prices for motorized and recreational vehicles (+1.4%). The gain was led by increases in passenger cars and light trucks (+1.1%), motor vehicle engines and motor vehicle parts (+1.2%) as well as aircraft (+2.2%). Higher prices for motorized and recreational vehicles were closely linked to the depreciation of the Canadian dollar relative to the US dollar.

Meat, fish, and dairy products increased for a fifth consecutive month, rising 0.7% in August. The increase was led by higher prices for fresh and frozen pork (+2.1%), fresh and frozen beef and veal (+1.2%) as well as processed meat products, other meats and animal by-products (+1.0%).

Primary non-ferrous metals products increased 0.2% in August, led by higher prices for other unwrought non-ferrous metals and non-ferrous metal alloys (+1.9%), as well as unwrought precious metals and precious metal alloys (+1.3%), specifically unwrought gold and gold alloys (+3.3%). Largely moderating the increase in the commodity group were lower prices for unwrought copper and copper alloys (-3.5%) and unwrought aluminum and aluminum alloys (-2.2%).

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 July to August 2015, the Canadian dollar depreciated 2.2% relative to the US dollar. If the exchange rate had remained constant, the IPPI would have declined 0.8% instead of decreasing 0.3%.

Industrial Product Price Index, 12-month change

The IPPI declined 0.4% over the 12-month period ending in August, after edging up 0.1% in July. The IPPI excluding energy and petroleum products posted its largest increase since September 2011, rising 4.0%.

The main reason for the year-over-year decline in the IPPI in August was energy and petroleum products (-22.2%), which posted its largest decline since April 2015. Lower prices for motor gasoline (-18.0%), diesel fuel (-27.6%), light fuel oils (-27.6%) as well as heavy fuel oils (-38.8%) were the main reasons behind the decline in energy and petroleum products.

Also contributing to the decline in the IPPI, but to a lesser extent, was chemicals and chemical products (-4.3%). The decline was led by lower prices for petrochemicals (-30.6%), while higher prices for ammonia and chemical fertilizers (+14.1%) and chemical products, not elsewhere classified (+7.6%) moderated the decline in the commodity group.

Largely moderating the decline in the IPPI were higher year-over-year prices for motorized and recreational vehicles (+13.4%), specifically passenger cars and light trucks (+14.0%), motor vehicle engines and motor vehicle parts (+9.1%) as well as aircraft (+21.4%).

Higher prices for meat, fish, and dairy products (+4.5%) also moderated the decline, specifically higher year-over-year prices for fresh and frozen beef and veal (+16.5%).

Raw Materials Price Index, monthly change

The RMPI (-6.6%) fell for the second consecutive month, posting its largest decline since January 2015. Of the six commodity groups, two were up and four were down.

Lower prices for crude energy products (-14.8%) were again the main reason for the decline in the RMPI, specifically conventional crude oil (-15.3%). Global production of crude oil continued to outpace demand, resulting in downward pressure on prices. The RMPI excluding crude energy products declined 0.9%.

Also contributing to the decline in the RMPI, but to a lesser extent, were lower prices for metal ores, concentrates and scrap (-2.4%).

Raw Materials Price Index, 12-month change

August marked the 13th consecutive year-over-year decline of the RMPI (-24.7%) and the largest decrease since August 2009, when prices fell 26.7%.

Lower prices for crude energy products (-45.2%) were largely responsible for the decline, specifically conventional crude oil (-46.2%). The RMPI excluding crude energy products declined 2.6% from the same month last year.

Lower prices for metal ores, concentrates and scrap (-8.2%), which posted their largest decline since March 2014, also contributed to the year-over-year decline of the RMPI.