Industrial product and raw materials price indexes

Manufacturers' prices weakened 1.0% in June and fell 2.7% on an annual basis, largely due to the strength of the Canadian dollar against the US dollar. If the impact of the Canadian dollar were removed, the Industrial Product Price Index (IPPI) would have risen 1.2% rather than falling 2.7% from a year ago.

From a monthly perspective, lower prices for motor vehicles and other transport equipment (-2.1%), pulp and paper products (-1.8%) and primary metal products (-1.5%) were the major contributors in the decline of the IPPI. Prices for chemical products also fell (-1.3%), as well as those for electrical and communication products (-1.0%). Prices for lumber products were up 1.3% from May as a result of decreased production due to mill shutdowns.

On an annual basis, lower prices for motor vehicles and other transport equipment (-9.7%), lumber and other wood products (-7.9%) and electrical and communication products (-6.2%) were the major contributors to the year-over-year decline in the IPPI.

The petroleum and coal products group continues to be an influence on the year-over-year change in the IPPI, with an increase of 4.1%. If petroleum and coal product prices had been excluded, the IPPI would have declined 3.1% instead of decreasing 2.7% on a year-over-year basis.

In addition to petroleum and coal products, prices for chemical products (+3.1%), meat, fish and dairy products (+2.9%), tobacco products (+17.4%) as well as fruit, vegetable and feed products (+2.1%) were also up compared with a year ago.

Crude oil fuels a modest rise in raw materials prices

On a monthly basis, raw materials prices were up 1.2% from May. Mineral fuels were the only contributors to the monthly increase in the Raw Materials Price Index (RMPI), with prices increasing 4.9%. Crude oil prices were 6.5% higher in June than in May, mainly the result of lower inventories. Lower prices for wood products, vegetable products, non-ferrous metals as well as ferrous materials partly offset the monthly increase. Prices for animal products were also down slightly (-0.2%) as price decreases for fresh fish and cattle were offset by increased prices for hogs.

Manufacturers paid 3.2% more for their raw materials than they did in June last year, compared with a decrease of 0.6% in May. Higher prices for mineral fuels (+8.8%) were mainly responsible for this annual rise in the RMPI. On a year-over-year basis, crude oil prices were up 8.0%, following a year-over-year decrease of 3.9% in May. Prices for animal products and non-metallic minerals were also up on an annual basis. These increases were partly offset by lower prices for wood products, non-ferrous metals, vegetable products and ferrous materials. If mineral fuels had been excluded, the RMPI would have decreased 1.0%.

The IPPI (1997=100) stood at 103.9 in June, down from its revised level of 104.9 in May. The RMPI (1997=100) was 114.3 in June, up from its revised level of 112.9 in May.

Impact of exchange rate continues to push down prices

From May to June, the value of the US dollar continued to weaken against the Canadian dollar pushing down prices of commodities quoted in US dollars, notably motor vehicles and lumber products. As a result, the total IPPI excluding the effect of the exchange rate, would have decreased 0.1% instead of 1.0%.

On a 12-month basis, the influence of the dollar is much stronger. Consequently, the IPPI excluding the effect of the exchange rate would have increased 1.2% rather than declining 2.7% from June 2002 to June 2003.

Prices for intermediate goods decrease on an annual basis

Prices for intermediate goods declined 0.9% from May. Lower prices for motor vehicles, pulp and paper products, chemical products, primary metal products as well as petroleum products were the major contributors to the decline.

Producers of intermediate goods received 1.8% less for their goods in June compared with the same month last year. Lower prices for motor vehicles, lumber products, pulp and paper products, as well as electrical and communication products, were partially offset by higher prices for petroleum and chemical products.

"Intermediate goods," sometimes referred to as "input goods," are goods that are generally bought by manufacturers to be further used in the production process, that is, to make other goods.

Finished goods decrease again from the previous year

On a monthly basis, prices for finished goods were down 1.1% from May. Lower prices for motor vehicles, electrical and communication products, machinery and equipment, pulp and paper products as well as chemical products were the major contributors to this decrease.

Declining prices for motor vehicles, electrical and communication products, machinery and equipment, as well as pulp and paper products, pushed year-over-year prices down 3.8% from June 2002. These decreases were partly offset by higher prices for tobacco products, meat, fish and dairy products, fruit, vegetable and feed products, petroleum products, as well as chemical products.

"Finished goods" are those generally purchased for the purpose of either consumption or investment. Most of the foods and feeds category ends up in the hands of consumers. Most capital goods are equipment and machinery generally bought by companies, government agencies, or governments. Much of the remainder is bought by consumers.

Available on CANSIM: tables 329-0038 to 329-0049 and 330-0006.

Definitions, data sources and methods: survey numbers, including related surveys, 2306 and 2318.

The June 2003 issue of Industry price indexes (62-011-XIE, $17/$163; 62-011-XPE, $22/$217) will be available in August.

For more information, or to enquire about the concepts, methods or data quality of this release, contact the Client Services Unit (613-951-9606; fax: 613-951-1539; infounit@statcan.gc.ca) or Danielle Gouin (613-951-3375; danielle.gouin@statcan.gc.ca), Prices Division.