Industrial product and raw materials price indexes, August 2015
The Industrial Product Price Index (IPPI) declined 0.3% in August, mainly as a result of lower prices for energy and petroleum products. The Raw Materials Price Index (RMPI) declined 6.6% in August, led by lower prices for crude energy products.
Industrial Product Price Index, monthly change
The IPPI (-0.3%) declined in August, after increasing 0.7% in July. Among the 21 major commodity groups, the declines were isolated as 2 groups were down, 17 were up and 2 were unchanged.
The main reason for the decline in the IPPI in August was lower prices for energy and petroleum products (-4.7%), led by lower prices for motor gasoline (-5.7%), light fuel oils (-6.8%) and diesel fuel (-5.1%). This was the largest decline for energy and petroleum products since January 2015, when prices fell 11.1%. The widespread declines for refined petroleum products correspond with a 26.8% fall in the price of conventional crude oil since June 2015, putting downward pressure on prices. The IPPI excluding energy and petroleum products increased 0.4%.
Also contributing to the decline in the IPPI were lower prices for chemicals and chemical products (-1.7%). The decrease was almost entirely attributable to lower prices for petrochemicals (-11.5%), which posted its largest decline since January 2015.
Largely moderating the decline in the IPPI were higher prices for motorized and recreational vehicles (+1.4%). The gain was led by increases in passenger cars and light trucks (+1.1%), motor vehicle engines and motor vehicle parts (+1.2%) as well as aircraft (+2.2%). Higher prices for motorized and recreational vehicles were closely linked to the depreciation of the Canadian dollar relative to the US dollar.
Meat, fish, and dairy products increased for a fifth consecutive month, rising 0.7% in August. The increase was led by higher prices for fresh and frozen pork (+2.1%), fresh and frozen beef and veal (+1.2%) as well as processed meat products, other meats and animal by-products (+1.0%).
Primary non-ferrous metals products increased 0.2% in August, led by higher prices for other unwrought non-ferrous metals and non-ferrous metal alloys (+1.9%), as well as unwrought precious metals and precious metal alloys (+1.3%), specifically unwrought gold and gold alloys (+3.3%). Largely moderating the increase in the commodity group were lower prices for unwrought copper and copper alloys (-3.5%) and unwrought aluminum and aluminum alloys (-2.2%).
Some IPPI prices are reported in US dollars and are converted to Canadian dollars using the average monthly exchange rate. Consequently, any change in the value of the Canadian dollar relative to the US dollar will affect the level of the index. From July to August 2015, the Canadian dollar depreciated 2.2% relative to the US dollar. If the exchange rate had remained constant, the IPPI would have declined 0.8% instead of decreasing 0.3%.
Industrial Product Price Index, 12-month change
The IPPI declined 0.4% over the 12-month period ending in August, after edging up 0.1% in July. The IPPI excluding energy and petroleum products posted its largest increase since September 2011, rising 4.0%.
The main reason for the year-over-year decline in the IPPI in August was energy and petroleum products (-22.2%), which posted its largest decline since April 2015. Lower prices for motor gasoline (-18.0%), diesel fuel (-27.6%), light fuel oils (-27.6%) as well as heavy fuel oils (-38.8%) were the main reasons behind the decline in energy and petroleum products.
Also contributing to the decline in the IPPI, but to a lesser extent, was chemicals and chemical products (-4.3%). The decline was led by lower prices for petrochemicals (-30.6%), while higher prices for ammonia and chemical fertilizers (+14.1%) and chemical products, not elsewhere classified (+7.6%) moderated the decline in the commodity group.
Largely moderating the decline in the IPPI were higher year-over-year prices for motorized and recreational vehicles (+13.4%), specifically passenger cars and light trucks (+14.0%), motor vehicle engines and motor vehicle parts (+9.1%) as well as aircraft (+21.4%).
Higher prices for meat, fish, and dairy products (+4.5%) also moderated the decline, specifically higher year-over-year prices for fresh and frozen beef and veal (+16.5%).
Raw Materials Price Index, monthly change
The RMPI (-6.6%) fell for the second consecutive month, posting its largest decline since January 2015. Of the six commodity groups, two were up and four were down.
Lower prices for crude energy products (-14.8%) were again the main reason for the decline in the RMPI, specifically conventional crude oil (-15.3%). Global production of crude oil continued to outpace demand, resulting in downward pressure on prices. The RMPI excluding crude energy products declined 0.9%.
Also contributing to the decline in the RMPI, but to a lesser extent, were lower prices for metal ores, concentrates and scrap (-2.4%).
Raw Materials Price Index, 12-month change
August marked the 13th consecutive year-over-year decline of the RMPI (-24.7%) and the largest decrease since August 2009, when prices fell 26.7%.
Lower prices for crude energy products (-45.2%) were largely responsible for the decline, specifically conventional crude oil (-46.2%). The RMPI excluding crude energy products declined 2.6% from the same month last year.
Lower prices for metal ores, concentrates and scrap (-8.2%), which posted their largest decline since March 2014, also contributed to the year-over-year decline of the RMPI.
Note to readers
With each release, data for the previous six months may have been revised. The indexes are not seasonally adjusted.
The Industrial Product Price Index 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 indicate their prices in foreign currencies, especially in US dollars, which are then converted into Canadian dollars. In particular, this is the case for motor vehicles, pulp, paper and wood products. Therefore, a rise or fall in the value of the Canadian dollar against its US counterpart affects the IPPI. However, the conversion into Canadian dollars only reflects how respondents provide their prices. This is not a measure that takes the full effect of exchange rates into account.
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 release, are calculated according to the indirect quotation of the exchange rate (for example, CAN$1 = US$X).
The Raw Materials Price Index reflects the prices paid by Canadian manufacturers for key raw materials. Many of those prices are set on the world market. However, as few prices are denominated in foreign currencies, their conversion into Canadian dollars has only a minor effect on the calculation of the RMPI.
Real-time CANSIM tables
The industrial product and raw materials price indexes for September will be released on October 29.
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