Industrial product and raw materials price indexes

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The Industrial Product Price Index (IPPI) declined 1.1% in May compared with April, pulled down for a second consecutive month by the appreciation of the Canadian dollar against its US counterpart. On the other hand, the 2.2% upswing in the Raw Materials Price Index (RMPI) was attributable to rising prices for crude oil.

The IPPI fell 1.1% in May, a much stronger decrease than the 0.5% decline observed in April.

The drop in the IPPI in May was widespread across the major product groups, with 14 out of 21 groups posting decreases and only 4 showing gains.

The IPPI was pulled down especially by prices for motor vehicles and other transport equipment (-4.0%), and, to a lesser extent, pulp and paper products (-3.1%), primary metal products (-2.4%), electrical and communication products (-2.3%) and lumber and other wood products (-1.9%). Most of these product groups are more affected by fluctuations in the exchange rate.

The Canadian dollar rose a substantial 6.4% in May against the US dollar. Some Canadian producers who export their products to the United States are generally paid in prices set in US dollars. Consequently, the relative weakness of the US dollar in relation to the Canadian dollar had the effect of reducing the corresponding prices in Canadian dollars. If the exchange rate used to convert these prices had remained unchanged, the IPPI would have risen 0.4% instead of declining 1.1%.

The effect of the rising Canadian dollar on the IPPI was tempered by the strength of prices for petroleum and coal products. These products posted a 5.2% increase, up sharply from the 1.5% rise observed in April. However, excluding petroleum and coal products, the IPPI fell 1.6%, a stronger decline than the 0.7% decrease in April.

12-month change: Third consecutive decline in the Industrial Product Price Index

Year over year, the IPPI declined 4.3% in May after decreases of 2.2% in April and 0.1% in March. The last time the IPPI recorded a comparable year-over-year decrease was in November 2003, when it declined 4.1%.

The IPPI was pulled down by the prices for petroleum and coal products (-39.1%) and primary metal products (-16.2%). This decline in prices was mainly offset by an increase in prices for motor vehicles and other transport equipment (+10.6%).

Year over year, the prices for products excluding petroleum and coal rose 1.5%, a third consecutive slow down of growth for this group of products.

Since May 2008, the Canadian dollar lost 13.2% of its value against its US counterpart, and if the direct effect of the exchange rate had been excluded, the IPPI would have fallen 8.2% instead of 4.3%.

Raw Material Price Index: Index rebounds on the strength of crude oil prices

The RMPI posted a monthly increase of 2.2% in May, after declining 0.3% in April.

Prices for mineral fuels increased 6.2% after falling 2.4% in April. The increase was primarily attributable to the 7.3% rise in the price of crude oil. Excluding mineral fuels, the RMPI fell 1.0%, after two consecutive monthly increases.

From May 2008 to May 2009, raw material prices fell 31.6%, comparable with the changes recorded since December 2008. The drop in raw material prices was attributable to a strong 45.9% decline for mineral fuels and, to a lesser extent, to decreases in the prices for non-ferrous metals (-24.1%).

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 May 2009 issue of Industry Price Indexes (62-011-X, free) will soon be available.

The industrial product and raw material price indexes for June will be released on July 30.

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), Producer Prices Division.