Industrial product and raw materials price indexes, October 2015
The Industrial Product Price Index (IPPI) declined 0.5% in October, mainly as a result of lower prices for motorized and recreational vehicles. The Raw Materials Price Index (RMPI) increased 0.4%, led by higher prices for crude energy products.
Industrial Product Price Index, monthly change
The IPPI declined for the third consecutive month, falling 0.5% in October. Among the 21 major commodity groups, 2 were up, 18 were down and 1 was unchanged.
The decline in the IPPI in October was mainly led by lower prices for motorized and recreational vehicles (-1.1%), specifically passenger cars and light trucks (-1.1%), motor vehicle engines and motor vehicle parts (-0.8%) and aircraft (-1.5%). Lower prices for motorized and recreational vehicles were closely linked to the appreciation of the Canadian dollar relative to the US dollar. Using the average monthly exchange rate, the Canadian dollar appreciated for the first time since May 2015 against the US dollar, posting the second largest increase since August 2012.
Energy and petroleum products (-1.0%) also had a large impact on the decline in the IPPI in October, primarily because of lower prices for motor gasoline (-1.8%), and, to a lesser extent, heavy fuel oils (-0.5%). Moderating the decline in this commodity group were higher prices for diesel fuel (+2.4%) as well as light fuel oils (+0.3%). While motor gasoline and diesel fuel are both refined petroleum products with common uses, they are distinct commodities, with different market drivers and seasonal influences. Motor gasoline demand typically peaks in the spring and summer, while diesel fuel tends to peak in the fall and winter as it is also used as a heating fuel. The IPPI excluding energy and petroleum products declined 0.4%.
Also contributing to the decline in the IPPI were meat, fish and dairy products (-0.6%) and primary non-ferrous metal products (-0.5%).
Lower prices for fresh and frozen beef and veal (-4.0%) were the main reason for the decrease in meat, fish, and dairy products, while higher prices for fresh and frozen poultry of all types (+3.2%) helped moderate the decline.
Unwrought aluminum and aluminum alloys (-3.8%) and unwrought copper and copper alloys (-3.9%) were the main reasons for the decrease in primary non-ferrous metal products, while higher prices for unwrought precious metals and precious metal alloys (+2.0%) moderated the decline.
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 September to October, the Canadian dollar appreciated 1.5% relative to the US dollar. If the exchange rate had remained constant, the IPPI would have declined 0.2% instead of decreasing 0.5%.
Industrial Product Price Index, 12-month change
The IPPI declined 0.4% over the 12-month period ending in October, after decreasing 0.4% in September.
The main reason for the year-over-year decline in the IPPI in October was energy and petroleum products (-21.4%), specifically lower prices for motor gasoline (-18.7%), diesel fuel (-20.4%), light fuel oils (-20.2%) and heavy fuel oils (-43.0%). The IPPI excluding energy and petroleum products increased 3.6% in October.
Also contributing to the decline in the IPPI was chemicals and chemical products (-3.7%). The decrease was led by lower prices for petrochemicals (-26.3%), while higher prices for ammonia and chemical fertilizers (+10.4%) and chemical products, not elsewhere classified (+5.9%) moderated the decline in this commodity group.
Year over year, higher prices for motorized and recreational vehicles (+10.9%), specifically passenger cars and light trucks (+11.7%), motor vehicle engines and motor vehicle parts (+7.0%) as well as aircraft (+17.5%), largely moderated the year-over-year decline in the IPPI.
Higher prices for meat, fish, and dairy products (+3.9%), specifically higher prices for fresh and frozen pork (+8.8%), fresh and frozen beef and veal (+3.7%) as well as processed meat products, other meats and animal by-products (+4.8%), also helped moderate the year-over-year decline in the IPPI.
Raw Materials Price Index, monthly change
The RMPI rose 0.4% in October, after increasing 2.4% in September. Of the six major commodity groups, three were up and three were down.
The main reason for the increase in the RMPI were higher prices for crude energy products (+2.4%), specifically conventional crude oil (+2.5%). The RMPI excluding crude energy products declined 0.8%.
To a lesser extent, metal ores, concentrates and scrap (+0.7%) also contributed to the increase.
Largely moderating the increase in the RMPI in October were lower prices for animals and animal products (-2.8%), specifically cattle and calves (-7.6%), which posted its largest decline since June 2007.
Raw Materials Price Index, 12-month change
The RMPI declined 17.5% over the 12-month period ending in October.
Lower prices for crude energy products (-32.4%) were largely responsible for the decrease, specifically conventional crude oil (-33.1%). The RMPI excluding crude energy products declined 3.1% from the same month last year.
Prices for animals and animal products (-6.0%) also contributed to the decline in the RMPI, specifically hogs (-18.5%) and cattle and calves (-3.3%), which posted its first year-over-year decrease since March 2013.
Also contributing to the year-over-year decline in the RMPI was metal ores, concentrates and scrap (-6.3%).
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 November 2015 will be released on January 5, 2016.
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca) or Media Relations (613-951-4636; STATCAN.mediahotline-ligneinfomedias.STATCAN@canada.ca).
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