Industrial product and raw materials price indexes

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Lower prices for petroleum products and crude oil pushed down prices in October for manufactured goods and raw materials for a third consecutive month.

Prices charged by manufacturers, as measured by the Industrial Product Price Index (IPPI), were down 0.1% in October, following a 1.5% drop in September. Lower prices for petroleum products were offset by higher prices for primary metal products and motor vehicles.

The 12-month change in the IPPI was up 1.2%, a lower rate of growth compared to the year-over-year increase of 1.4% in September. Upward pressure came mainly from higher prices for primary metal products and pulp and paper products.

The Raw Materials Price Index (RMPI) was down 2.8% from September to October, following a 5.2% decline in September. The decrease was due to mineral fuels, as prices for crude oil declined for a third consecutive month. On the other hand, non-ferrous metals and vegetable products registered significant price increases.

Compared to October of last year, raw materials cost factories 2.0% more, a significant change from the year-over-year increase of 4.0% in September.

The IPPI stood at 113.4 (1997=100) in October, down from a revised level of 113.5 in September. The RMPI stood at 155.5 (1997=100), down from 160.0 in September.

IPPI: Petroleum product prices continue to fall

On a month-over-month basis, manufacturers' prices were down 0.1%, as lower prices for petroleum products were offset by higher prices for primary metals and motor vehicles.

Petroleum and coal product prices decreased by 6.3% compared to September, the third consecutive monthly decline. If petroleum and coal product prices had been excluded, the IPPI would have increased 0.6% rather than falling 0.1%.

Lower prices were also observed for lumber and other wood products as well as meat, fish and dairy products.

On the other hand, prices for primary metal products rose 4.4% compared to September, following two months of decline. Prices for nickel products were up by 15.9%, due to strong demand and lower inventories. Higher prices were also observed for refined zinc products (+19.6%), copper and copper alloy products (+7.0%) as well as aluminum products (+1.8%).

Motor vehicles and other transport equipment were up 0.7%, mainly due to a weaker Canadian dollar. Prices for fruit, vegetable and feed products (+0.9%), as well as pulp and paper products (+0.8%), were also higher compared to September.

IPPI: Primary metal products are the major contributors to the 12-month change

The IPPI was up 1.2% in October compared with the same month a year earlier, a deceleration in the rate of growth for a third consecutive month. The slowdown in the annual increase was mainly due to the prices of petroleum products. If petroleum and coal product prices had been excluded, the IPPI would have increased 2.9%.

Prices for primary metal products were up 31.8% compared to October 2005. Prices for nickel products (+142.4%), copper products (+74.9%), refined zinc products (+148.8%) and aluminum products (+16.5%) were all higher compared with one year earlier.

Higher prices for pulp and paper products, metal fabricated products, non-metallic mineral products, fruit, vegetable and feed products and tobacco products also contributed to the annual increase.

The annual rate of growth in the IPPI was dampened by lower prices for petroleum and coal products (-14.0%), as well as lower prices for motor vehicles and other transport equipment (-2.7%), lumber and other wood products (-7.9%) and chemicals and chemical products (-2.5%).

RMPI: Crude oil prices continue to push down the cost of raw materials

Raw material prices fell 2.8% in October, the third consecutive monthly decrease following a decline of 5.2% in September.

Mineral fuels were the major contributor to this monthly drop, with prices declining 10.7% compared to September. Prices for crude oil were down 12.3%, mainly due to higher inventories as well as weaker demand. If mineral fuels had been excluded, the RMPI would have risen 5.0% from September instead of falling 2.8%.

Non-ferrous metal prices were up 11.8%, as prices for zinc, copper, lead, radio-active concentrates and nickel increased due to lower inventories and strong demand.

Prices for vegetable products rose 6.3% from September, as prices for wheat, corn, canola and soybeans fell. This was mainly the result of lower than expected crop production due to adverse climate conditions as well as strong demand.

Prices increased for animal and animal products (+0.3%) and ferrous materials (+0.1%) from September to October, while prices for non-metallic minerals remained unchanged.

On a 12-month basis, the price of raw materials rose 2.0% in October, slower than the 4.0% year-over-year increase in September. This continues the slowdown in the rate of growth observed since May 2006, when prices had increased 23.6% from the previous year. If mineral fuels had been excluded, the RMPI would have increased 24.8% instead of rising 2.0%.

Non-ferrous metals were the major contributors to the 12-month increase with prices rising 79.7%, mainly the result of year-over-year price increases for zinc, radio-active concentrates, copper, nickel and lead.

Prices were also higher than one year ago for wood, vegetable products, ferrous materials as well as non-metallic minerals.

Mineral fuels were down 16.1% with crude oil prices falling 16.9%. This was the largest negative year-over-year change since February 2004. Prices for animals and animal products were also down slightly from a year ago.

Impact of the exchange rate

The value of the Canadian dollar fell 1.1% against the US dollar between September and October. As a result, the total IPPI excluding the effect of the exchange would have fallen 0.4% instead of its actual decrease of 0.1%.

On a 12-month basis, the value of the Canadian dollar rose 4.3% against the US dollar. If the impact of the exchange rate had been excluded, producer prices would have risen 2.3% between October 2005 and October 2006, rather than their actual increase of 1.2%.

Prices for intermediate goods are up slightly

Prices for intermediate goods increased by 0.1% from September. Higher prices for primary metal products, pulp and paper products, fruit, vegetable and feed products and motor vehicles were offset by lower prices for petroleum products, lumber products as well as meat, fish and dairy products.

Producers of intermediate goods received 3.2% more for their goods in October 2006 than in October 2005. Higher prices were registered for primary metal products, pulp and paper products, metal fabricated products, non-metallic mineral products, electrical and communication products, fruit, vegetable and feed products and rubber, leather and plastic fabricated products.

These increases were partly offset by lower prices for petroleum products, lumber products, chemical products, motor vehicles and tobacco products.

Lower prices for finished goods

Prices for finished goods were down 0.3% from September. Lower prices for petroleum products, lumber products and meat, fish and dairy products were partially offset by higher prices for motor vehicles and electrical and communication products.

Compared with October 2005, prices for finished goods declined by 1.8%. Lower prices were registered for petroleum products, motor vehicles as well as machinery and equipment.

These decreases were partly offset by higher prices for tobacco products, fruit, vegetable and feed products, meat, fish and dairy products, furniture and fixtures, beverages as well as non-metallic mineral products.

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 October 2006 issue of Industry Price Indexes (62-011-XIE, free) will soon be available.

The Industrial product and raw material price indexes for November 2006 will be released on January 4, 2007.

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; prices-prix@statcan.gc.ca) or Danielle Gouin (613-951-3375; danielle.gouin@statcan.gc.ca), Prices Division.

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