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Industrial product and raw materials price indexes

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October 2009 (Previous release)

The Industrial Product Price Index declined 0.3% in October, pulled down by the strength of the Canadian dollar in relation to its US counterpart. The Raw Materials Price Index rose 2.5%, mainly as a result of higher prices for crude oil.

The Industrial Product Price Index (IPPI) continued its downward trend that began in September 2008. The decrease in October 2009 was a second consecutive decline, following a 0.4% drop in September.

The IPPI was mainly pulled down by the strength of the Canadian dollar, which appreciated 2.6% in October in relation to 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 0.3%.

Prices for industrial goods decrease again

The change in the exchange rate had the effect of lowering the value of motor vehicles and other transport equipment (-1.5%), which was the largest contributor to the drop in the IPPI. Other smaller price decreases were observed for pulp and paper products, lumber and other wood products, electrical and communication products, and machinery and equipment.

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 that are not produced in Canada.

However, the effect of the strong Canadian dollar was tempered by a 1.6% rise in prices for petroleum and coal products. This increase in petroleum and coal prices followed a 2.6% decline in September.

In October, excluding petroleum and coal prices, the IPPI fell 0.5%, a larger drop than the 0.2% decline in September.

12-month change: The downward trend in the Industrial Product Price Index continues

The IPPI fell 6.3% in October compared with the same month a year earlier, marking a seventh consecutive year-over-year decline. Although slightly greater than the 6.0% drop in September, the decrease was similar to the average for the movements of the past five months.

The IPPI was pulled down mainly by the prices for petroleum and coal products (-20.0%) and, to a lesser degree, by prices for motor vehicles and other transport equipment (-6.7%) and chemical products (-10.9%).

Year over year, prices for products excluding petroleum and coal declined 4.5%. This was the largest of five consecutive declines, reinforcing the downward trend.

Since October 2008, the Canadian dollar appreciated 12.3% in relation to its US counterpart, and if the direct effect of the exchange rate had been excluded, the IPPI would have fallen 3.4% instead of 6.3%.

Raw Materials Price Index: Upward trend continues on the strength of crude oil prices

The Raw Materials Price Index (RMPI) increased 2.5% in October, following a 1.0% decline in September. Raw material prices are continuing their upward trend that began in January 2009.

The volatile movements of the RMPI since July are mainly a result of significant fluctuations in prices for mineral fuels, especially crude oil. Prices for crude oil rose 5.9% in October, following a 1.6% drop in September.

The 2.0% increase in prices for non-ferrous metals also contributed to the advance of the Raw Materials Price Index. Non-ferrous metals registered a third consecutive increase. Excluding mineral fuels, the RMPI posted zero growth in October, and the index has remained basically stable since May 2009.

From October 2008 to October 2009, raw material prices fell 7.6%, a much smaller decrease than the 21.4% year-over-year decline in September. The drop in raw material prices was mainly attributable to a 12.3% reduction for mineral fuels and, to a lesser extent, a 6.9% decrease in prices for animals and animal products. On the other hand, raw material prices were bolstered by higher prices for non-ferrous metals (+12.4%).

Raw materials prices are up

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

The Industrial product and raw material price indexes for November will be released on January 5, 2010.

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.

Table 1

Industrial product price indexes
  Relative importance1 October 2008 September 2009r October 2009p October 2008 to October 2009 September to October 2009
  (1997=100) % change
Industrial Product Price Index (IPPI) 100.00 123.2 115.8 115.5 -6.3 -0.3
IPPI excluding petroleum and coal products 94.32 115.0 110.3 109.8 -4.5 -0.5
Aggregation by commodities            
Meat, fish and dairy products 5.78 112.9 112.4 111.9 -0.9 -0.4
Fruit, vegetables, feeds and other food products 5.99 116.6 117.2 117.2 0.5 0.0
Beverages 1.57 127.5 130.0 129.9 1.9 -0.1
Tobacco and tobacco products 0.63 222.8 223.6 223.6 0.4 0.0
Rubber, leather and plastic fabricated products 3.30 123.2 120.3 120.4 -2.3 0.1
Textile products 1.58 103.3 101.6 101.5 -1.7 -0.1
Knitted products and clothing 1.51 104.7 105.0 105.0 0.3 0.0
Lumber and other wood products 6.30 85.2 81.3 80.5 -5.5 -1.0
Furniture and fixtures 1.59 124.1 124.4 124.4 0.2 0.0
Pulp and paper products 7.23 116.6 106.1 105.2 -9.8 -0.8
Printing and publishing 1.70 124.1 123.6 123.3 -0.6 -0.2
Primary metal products 7.80 136.7 131.5 131.8 -3.6 0.2
Metal fabricated products 4.11 138.3 131.0 130.7 -5.5 -0.2
Machinery and equipment 5.48 111.3 109.6 109.0 -2.1 -0.5
Motor vehicles and other transport equipment 22.16 96.7 91.6 90.2 -6.7 -1.5
Electrical and communications products 5.77 95.9 93.3 92.5 -3.5 -0.9
Non-metallic mineral products 1.98 126.9 128.4 128.3 1.1 -0.1
Petroleum and coal products2 5.68 275.6 217.0 220.4 -20.0 1.6
Chemicals and chemical products 7.07 147.1 130.4 131.1 -10.9 0.5
Miscellaneous manufactured products 2.40 123.3 123.6 123.9 0.5 0.2
Miscellaneous non-manufactured products 0.38 274.8 234.2 237.0 -13.8 1.2
Intermediate goods3 60.14 129.0 119.1 119.1 -7.7 0.0
First-stage intermediate goods4 7.71 145.2 128.6 129.9 -10.5 1.0
Second-stage intermediate goods5 52.43 126.5 117.7 117.5 -7.1 -0.2
Finished goods6 39.86 114.7 110.8 110.0 -4.1 -0.7
Finished foods and feeds 8.50 119.1 120.6 120.5 1.2 -0.1
Capital equipment 11.73 104.9 101.1 100.1 -4.6 -1.0
All other finished goods 19.63 118.6 112.3 111.4 -6.1 -0.8
revised
preliminary
The relative importance is based on the 1997 values of production at December 1996 prices.
This index is estimated for the current month.
Intermediate goods are goods used principally to produce other goods.
First-stage intermediate goods are items used most frequently to produce other intermediate goods.
Second-stage intermediate goods are items most commonly used to produce final goods.
Finished goods are goods most commonly used for immediate consumption or for capital investment.

Table 2

Raw materials price indexes
  Relative importance1 October 2008 September 2009r October 2009p October 2008 to October 2009 September to October 2009
  (1997=100) % change
Raw Materials Price Index (RMPI) 100.00 174.9 157.7 161.6 -7.6 2.5
Mineral fuels 35.16 294.3 246.0 258.2 -12.3 5.0
Vegetable products 10.28 112.3 103.2 102.0 -9.2 -1.2
Animals and animal products 20.30 113.7 107.2 105.9 -6.9 -1.2
Wood 15.60 81.6 76.0 76.1 -6.7 0.1
Ferrous materials 3.36 154.2 129.7 127.8 -17.1 -1.5
Non-ferrous metals 12.93 157.0 173.0 176.5 12.4 2.0
Non-metallic minerals 2.38 173.2 174.2 174.0 0.5 -0.1
RMPI excluding mineral fuels 64.84 119.7 117.0 117.0 -2.3 0.0
revised
preliminary
The relative importance is based on the 1997 values of intermediate inputs at December 1996 prices.