Analysis

The Industrial Product Price Index (IPPI) edged up 0.1% in July, led mainly by primary metal products. The Raw Materials Price Index (RMPI) rose 1.8%, largely because of higher prices for crude oil.

The IPPI edged up 0.1%, following a 0.9% drop in June. In July, 12 major product groups were up compared with 7 in June.

In July, the IPPI advance was mainly led by primary metal products (+1.4%), while lower petroleum and coal prices (-0.9%) dampened the increase of the overall index.

Except for iron and steel products, which were down slightly, primary metal products increased in July, partially due to lower global inventories. The biggest contributor to the IPPI advance was aluminum products, with an increase of 4.2%, followed by copper and copper alloys (+4.1%) and by other non-ferrous metal products (+0.8%).

Refined zinc products (+5.0%) were the largest contributor to the increase of other non-ferrous metal products.

Other than primary metal products, few products made a significant contribution to the IPPI increase. Among them, motor vehicles and other transportation equipment (+0.3%) as well as pulp and paper products (+0.6%) posted advances, as a result of the depreciation of the Canadian dollar relative to its American counterpart.

In the pulp and paper products group, the price of newsprint paper was the main contributor to the increase, especially exported newsprint paper, which rose 1.6%.

In July, the 0.5% decrease in the value of the Canadian dollar against the US dollar had a modest influence on the IPPI gain. Some Canadian producers who export their products to the United States are generally paid on the basis of prices set in US dollars. Consequently, the weakness of the Canadian dollar in relation to the American dollar had the effect of increasing the corresponding prices in Canadian dollars. If the exchange rate used to convert these prices had remained at the same level, the IPPI would have been unchanged instead of up 0.1%.

The petroleum and coal index registered its third consecutive decrease. However, the 0.9% decrease in this index in July was smaller than the 2.3% declines in May and June.

Excluding petroleum and coal prices, the IPPI rose 0.3% in July, compared to a 0.7% decline in June. The movement of the Index remains fairly stable since June 2009.

12-month change in the IPPI: Third consecutive increase

The IPPI was up 1.0% in July compared with the same month a year earlier. The Index posted a third consecutive gain, smaller than the increase in May (+1.5%) but larger than the one in June (+0.2%).

The increase in the IPPI over the past 12 months was led mostly by higher prices for primary metal products (+9.4%) and petroleum and coal products (+7.5%). To a lesser extent, chemical products (+4.6%) as well as pulp and paper products (+2.3%) contributed to the advance of the IPPI in July.

All major products of the primary metal products group registered gains. The biggest contributor was other non-ferrous metal products, with an 18.4% increase, followed by copper and copper alloys (+17.2%), aluminum products (+9.8%), nickel products (+13.7%) and iron and steel products (+2.3%).

In particular, the increase in other non-ferrous metal products was a result of sharply higher prices for precious metals. Prices for gold and gold alloy products, silver and platinum, and precious metal basic manufactured shapes rose by 20.2%, 27.5% and 26.6% respectively.

With a 7.5% increase over the past 12 months, the petroleum and coal products index advanced at a somewhat faster pace than in June on a year-over-year basis (+2.7%). The June increase is the smallest gain since November 2009, month when prices began to recover.

The product group that contributed most to the increase in chemical product prices was organic chemicals (+16.7%).

The price of pulp rose 14.6%, particularly sulphate wood pulp (+16.0%), which contributed to the increase in the pulp and paper products index. However, this increase was dampened by lower prices for newsprint and other paper for printing (-3.2%).

The IPPI year-over-year advance was moderated by lower prices for motor vehicles and other transportation equipment (-3.9%). This decline was primarily a result of a 7.6% appreciation of the Canadian dollar relative to the US dollar. If the direct effect of the exchange rate had been excluded, the IPPI would have risen 2.8% instead of 1.0%.

Between July 2009 and July 2010, prices for products excluding petroleum and coal increased 0.3%, registering its first gain since May 2009.

Raw Materials Price Index: Upswing after two consecutive declines

The Raw Materials Price Index (RMPI) increased 1.8% following consecutive declines in May (-7.3%) and June (-0.2%).

In July, higher prices for mineral fuels (+1.8%) and, to a lesser extent, non-ferrous metals (+3.6%) and vegetable products (+4.1%) were the main factors in the RMPI growth.

Prices for almost all major products were up, except for wood products and non-metallic minerals.

Crude oil prices rose 3.0% in July following a 2.4% increase in June. These two consecutive advances were insufficient to bring the index back up to its level prior to May, the month when crude oil prices (-14.2%) fell significantly.

All major groups of non-ferrous metals, except precious metals, were up, including zinc concentrates (+5.2%), copper and nickel concentrates (+4.5%) and lead concentrates (+7.7%).

Vegetable products were up, primarily due to higher prices for oilseeds (+8.6%) and grains (+5.0%). Specifically, there were increases for canola (+9.6%) and soybeans (+8.3%) among the oilseeds, and for wheat (+8.7%) and corn (+2.1%) among the grains. Vegetable product prices rose mainly as a result of reduced global supply due to inclement weather.

Excluding mineral fuels, the RMPI rebounded 1.7% following two consecutive monthly declines.

Compared with the same month a year earlier, raw materials prices increased 6.0% in July, after remaining unchanged in June. In July, raw materials prices were up mainly as a result of higher prices for mineral fuels, which increased 7.9%.

The prices of non-ferrous metals (+7.9%), ferrous materials (+20.4%) as well as animals and animal products (+3.1%) contributed, to a lesser extent, to the year-over-year RMPI advance in July.

Non-ferrous metals were up, led primarily by higher prices for precious metals (+22.0%), copper and nickel concentrates (+20.2%) and non-ferrous metal scrap (+20.9%). However, these increases were offset by lower prices for radioactive products (-26.0%).

The rise in prices for animals and animal products between July 2009 and July 2010 was largely attributable to a 17.2% increase in prices for hogs-swine for slaughter.