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Posted May 1, 2012

Cost to Produce increase

Industrial product and raw materials edge up in March 2012

Statscan - The Industrial Product Price Index (IPPI) edged up 0.2% in March, led by higher prices for petroleum and coal products. However, the advance of IPPI was moderated by primary metal products (-1.0%). The Raw Materials Price Index (RMPI) declined 1.6%, largely because of mineral fuels.

Prices for industrial goods increase slightly

Industrial Product Price Index, monthly change

The IPPI was up 0.2% in March compared with February. Despite a third consecutive gain, the IPPI remained below its recent 2011 peak. The number of product groups that have risen since the beginning of the year declined from 10 in January to 6 in March.

The increase in the IPPI in March was primarily the result of higher prices for petroleum and coal products (+1.8%), particularly gasoline (+4.7%), which was up for a third straight month.

Fruit, vegetables and feeds (+0.8%) and lumber and other wood products (+0.7%) also contributed to the increase of the index.

Prices for fruit, vegetables and feeds were pushed upward mainly by feeds (+2.2%).

Softwood lumber (+1.3%) was the leading factor in the increase in lumber and other wood product prices. The strength of building permits in the United States played a role in sustaining prices, although the demand for wood was modest.

The advance in the IPPI was moderated mainly by primary metal products (-1.0%), particularly nickel products (-8.8%), aluminum products (-1.2%), silver and platinum (-4.0%) and gold and gold alloys in primary forms (-4.4%). The decline in nickel and aluminum prices was partly a result of weaker economic activity in Asia, a large importer of metals.

Prices for motor vehicles and other transportation equipment edged down 0.1%.

Some Canadian producers who export their products are generally paid on the basis of prices set in US dollars. Consequently, the 0.3% increase in the value the Canadian dollar relative to the US dollar in March had the effect of reducing the corresponding prices in Canadian dollars. However, the exchange rate had a negligible impact on the index as a whole.

The IPPI excluding petroleum and coal products declined 0.1% in March.

12-month change in the Industrial Product Price Index

Compared with the same month a year earlier, the IPPI rose 0.9% in March. The index continued to rise on a 12-month basis, though its growth has been slowing since September 2011.

Relative to March 2011, the index was pushed upward mainly by higher prices for petroleum and coal products (+4.2%), notably gasoline (+7.9%).

More modest contributions to the year-over-year increase in the index were made by motor vehicles and other transportation equipment (+1.6%) and fruit, vegetables and feeds (+2.6%).

On a 12-month basis, the advance of the IPPI was moderated primarily by a decrease in primary metal products (-5.7%), which posted its fifth consecutive decline. The biggest contributors to the decrease in this group of products were nickel (-28.9%), aluminum (-7.6%) and copper and copper alloys (-5.6%).

The 1.7% decline in the value of the Canadian dollar against the US dollar contributed to the growth of the index. Without the impact of the exchange rate, the IPPI would have risen 0.5% instead of 0.9%.

Compared with March 2011, the IPPI excluding petroleum and coal products increased 0.4%, a slightly slower pace than in recent months.

Raw Materials Price Index, monthly change

The RMPI was down 1.6% in March, its second consecutive monthly decrease. The decline was mostly the result of mineral fuels (-3.6%), particularly crude petroleum (-3.8%), which decreased for a fourth straight month.

The decline of the RMPI was moderated primarily by vegetable products (+1.6%), especially oilseeds (+5.7%) and grains (+1.5%).

Within the oilseeds product group, prices rose for canola (+7.8%) and soybeans (+5.8%). The increase in soybean prices was partly the result of a decline in global supply, especially in South America, where dry weather conditions disrupted normal production.

The main contributors to the increase in grain prices were corn (+2.0%), barley (+2.8%) and wheat (+1.0%).

The RMPI excluding mineral fuels posted a 0.3% increase in March, its third consecutive monthly advance.

12-month change in the Raw Materials Price Index

Compared with the same month a year earlier, the RMPI was down 5.6%, its first decrease since October 2009.

The index was pushed downward largely by lower prices for mineral fuels (-8.3%) and, to a lesser extent, by non-ferrous metals (-10.1%).

Crude petroleum (-8.4%) was primarily responsible for the decline in mineral fuels, posting its first decrease since October 2010.

Except for precious metals, all commodities in the non-ferrous metals group were down on a 12-month basis. Among the main contributors to the decline were radioactive concentrates (-23.9%), non-ferrous scrap metals (-10.9%) and other non-ferrous base metals (-14.4%).

Year over year, the RMPI excluding mineral fuels fell 3.2% in March, its fourth consecutive decline.

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