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Industrial product and raw materials price indexes
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The Industrial Product Price Index (IPPI) declined 1.9% and the Raw Materials Price Index (RMPI) fell 15.4% in December compared with a month earlier, as petroleum prices continued to move sharply downward.
Chart 1
The IPPI declined 1.9% in December, which was less than the significant 2.7% drop recorded in November. With this fourth consecutive monthly decrease, the IPPI was down 5.7% from its peak in August 2008. The contraction in prices for petroleum and coal products continued in December, with an 18.1% decrease following a 19.0% decline in November.
Excluding petroleum and coal products, the IPPI fell 0.1%, a second monthly decrease after a 0.7% decline in November.
Product groups other than petroleum and coal contributed little to the movement of the total IPPI. Of the 20 major groups, 6 saw decreases and 10 saw increases in prices. Primary metal products (-3.1%), chemical products (-2.0%) and motor vehicles and other transport equipment (+0.9%) posted the most significant price changes in the IPPI in December.
The Canadian dollar lost 1.3% of its value against the US dollar in December. Some Canadian producers who export their products to the United States are generally paid in prices that are fixed in US dollars. Consequently, the relative strength of the US dollar in relation to the Canadian dollar had the effect of inflating their Canadian dollar equivalent prices. If the exchange rate used to convert these prices had remained unchanged, the IPPI would have fallen 2.3% compared with November, instead of declining 1.9%.
12-month change: Industrial prices post slower growth and a ninth straight increase
Year over year, the IPPI rose 2.5% in December, which marks a second substantial slowing in the growth of the index. This was the lowest advance in the index in eight months.
Note to readers
The Industrial Product Price Index (IPPI) reflects the prices that producers in Canada receive as the goods leave the plant gate. It does not reflect what the consumer pays. Unlike the Consumer Price Index, the IPPI excludes indirect taxes and all the costs that occur between the time a good leaves the plant and the time the final user takes possession of it, including the transportation, wholesale, and retail costs.
Canadian producers export many goods. They often quote their prices in foreign currencies, particularly for motor vehicles, pulp and paper products, and wood products. Determining the full effect of fluctuating exchange rates on the IPPI is a difficult analytical task. However, it should be noted that many prices collected to calculate the IPPI are quoted in US dollars and then converted into Canadian dollars. Therefore, a rise or fall in the value of the Canadian dollar against its US counterpart affects the IPPI. The conversion of prices received in US dollars is based on the average monthly exchange rate (noon spot rate) established by the Bank of Canada, and it is available on CANSIM in table 176-0064 (series v37426). Monthly and annual variations in the exchange rate, as described in the text, are calculated according to the indirect quotation of the exchange rate (for example, CAN$1 = US$X).
The Raw Materials Price Index (RMPI) reflects the prices paid by Canadian manufacturers for key raw materials. Many of these prices are set in a world market. Unlike the IPPI, the RMPI includes goods not produced in Canada.
This slowing in the growth of the IPPI in December was caused by a substantial 28.1% drop in the prices for petroleum and coal products, the largest decline since December 2001.
The prices for products other than petroleum and coal rose 6.5%, down from the rate of 7.9% recorded in November. Motor vehicles and other transport equipment as well as pulp and paper products contributed the most to the increase in the IPPI, pushed up in part by the depreciation of the Canadian dollar in relation to its US counterpart.
The Canadian dollar lost 18.7% of its value, and if the direct effect of the exchange rate had been excluded, the IPPI would have declined 4.1% instead of increasing 2.5%.
Decline in raw material prices continues for a fifth consecutive month, accelerating in December
The RMPI fell a substantial 15.4% in December. During the last three months of 2008, the decline accelerated, and the index is now below its level registered in January 2005.
The prices for mineral fuels continued to contract, falling 29.9% in December after four strong monthly decreases. Excluding mineral fuels, the RMPI declined 2.3%, compared with declines of 2.8% in November and 5.1% in October. Product groups other than mineral fuels had comparatively little effect on the movement of the RMPI.
Chart 2
From December 2007 to December 2008, raw material prices fell 29.9% compared with a 16.8% decline in November. This was a third consecutive year-over-year decrease. The decline in prices for raw materials was attributable to the sharp 47.7% drop for mineral fuels and, to a lesser extent, to the 34.3% drop for non-ferrous metals prices, the result of a contraction in the global demand for base metals.
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 December 2008 issue of Industry Price Indexes (62-011-XWE, free) will soon be available.
The industrial product and raw material price indexes for January will be released on February 27.
For more information, or to enquire about the concepts, methods or data quality of this release, contact Client Services (613-951-9606, fax: 613-951-2848, prices-prix@statcan.gc.ca), Prices Division.
Table 1
| (1997=100) | ||||||
|---|---|---|---|---|---|---|
| Relative importance | December 2007 | November 2008r | December 2008p | December 2007 to December 2008 | November to December 2008 | |
| % change | ||||||
| Industrial Product Price Index (IPPI) | 100.00 | 114.5 | 119.7 | 117.4 | 2.5 | -1.9 |
| IPPI excluding petroleum and coal products | 94.32 | 106.9 | 114.0 | 113.9 | 6.5 | -0.1 |
| Aggregation by commodities | ||||||
| Meat, fish and dairy products | 5.78 | 108.1 | 112.8 | 112.5 | 4.1 | -0.3 |
| Fruit, vegetables, feeds and other food products | 5.99 | 113.4 | 115.9 | 115.5 | 1.9 | -0.3 |
| Beverages | 1.57 | 125.5 | 127.2 | 127.3 | 1.4 | 0.1 |
| Tobacco and tobacco products | 0.63 | 218.2 | 220.6 | 220.6 | 1.1 | 0.0 |
| Rubber, leather and plastic fabricated products | 3.30 | 116.3 | 122.7 | 122.1 | 5.0 | -0.5 |
| Textile products | 1.58 | 99.1 | 102.4 | 102.6 | 3.5 | 0.2 |
| Knitted products and clothing | 1.51 | 104.7 | 104.8 | 104.8 | 0.1 | 0.0 |
| Lumber and other wood products | 6.30 | 81.3 | 85.4 | 85.0 | 4.6 | -0.5 |
| Furniture and fixtures | 1.59 | 120.6 | 123.3 | 123.3 | 2.2 | 0.0 |
| Pulp and paper products | 7.23 | 101.6 | 116.3 | 117.0 | 15.2 | 0.6 |
| Printing and publishing | 1.70 | 115.8 | 124.4 | 125.1 | 8.0 | 0.6 |
| Primary metal products | 7.80 | 131.2 | 127.3 | 123.4 | -5.9 | -3.1 |
| Metal fabricated products | 4.11 | 123.9 | 137.0 | 137.1 | 10.7 | 0.1 |
| Machinery and equipment | 5.48 | 103.4 | 111.8 | 112.2 | 8.5 | 0.4 |
| Motor vehicles and other transport equipment | 22.16 | 85.8 | 98.4 | 99.3 | 15.7 | 0.9 |
| Electrical and communications products | 5.77 | 89.3 | 96.6 | 97.0 | 8.6 | 0.4 |
| Non-metallic mineral products | 1.98 | 123.1 | 126.8 | 126.8 | 3.0 | 0.0 |
| Petroleum and coal products1 | 5.68 | 254.4 | 223.3 | 182.8 | -28.1 | -18.1 |
| Chemicals and chemical products | 7.07 | 130.2 | 141.7 | 138.9 | 6.7 | -2.0 |
| Miscellaneous manufactured products | 2.40 | 114.1 | 122.4 | 124.0 | 8.7 | 1.3 |
| Miscellaneous non-manufactured products | 0.38 | 418.4 | 275.0 | 299.0 | -28.5 | 8.7 |
| Intermediate goods2 | 60.14 | 119.6 | 124.1 | 121.1 | 1.3 | -2.4 |
| First-stage intermediate goods3 | 7.71 | 148.0 | 132.9 | 127.0 | -14.2 | -4.4 |
| Second-stage intermediate goods4 | 52.43 | 115.3 | 122.8 | 120.1 | 4.2 | -2.2 |
| Finished goods5 | 39.86 | 106.9 | 113.0 | 112.0 | 4.8 | -0.9 |
| Finished foods and feeds | 8.50 | 115.9 | 118.9 | 119.0 | 2.7 | 0.1 |
| Capital equipment | 11.73 | 95.3 | 105.8 | 106.4 | 11.6 | 0.6 |
| All other finished goods | 19.63 | 110.0 | 114.8 | 112.4 | 2.2 | -2.1 |
Table 2
| (1997=100) | ||||||
|---|---|---|---|---|---|---|
| Relative importance | December 2007 | November 2008r | December 2008p | December 2007 to December 2008 | November to December 2008 | |
| % change | ||||||
| Raw Materials Price Index (RMPI) | 100.00 | 182.6 | 151.3 | 128.0 | -29.9 | -15.4 |
| Mineral fuels | 35.16 | 304.5 | 227.1 | 159.2 | -47.7 | -29.9 |
| Vegetable products | 10.28 | 119.7 | 112.8 | 108.6 | -9.3 | -3.7 |
| Animals and animal products | 20.30 | 103.3 | 112.7 | 111.4 | 7.8 | -1.2 |
| Wood | 15.60 | 82.4 | 81.7 | 81.1 | -1.6 | -0.7 |
| Ferrous materials | 3.36 | 128.6 | 147.6 | 147.9 | 15.0 | 0.2 |
| Non-ferrous metals | 12.93 | 207.8 | 143.6 | 136.5 | -34.3 | -4.9 |
| Non-metallic minerals | 2.38 | 150.4 | 172.3 | 172.3 | 14.6 | 0.0 |
| RMPI excluding mineral fuels | 64.84 | 126.2 | 116.2 | 113.5 | -10.1 | -2.3 |
