Industrial product and raw materials price indexes for September 2009
Statscan - The Industrial Product Price Index (-0.5%) and the Raw Materials Price Index (-1.1%) were both down in September compared with August, mainly as a result of declining petroleum prices.
The decrease in the Industrial Product Price Index (IPPI) in September followed a 0.5% advance in August. Since May, the level of the index has been fairly stable in its movement, alternating between upward and downward movements of similar size.
Petroleum and coal prices declined 2.6% after rising 6.2% in August. Of the 21 major product groups, 11 recorded a price decline while 3 increased. With the exception of petroleum and coal, the other product groups contributed only slightly to the movement of the IPPI.
In September, excluding petroleum and coal prices, the IPPI fell 0.3%, continuing its downward trend with a sixth consecutive decline. Among the most significant decreases were fruit, vegetables and feeds (-1.3%) as well as motor vehicles and other transport equipment (-0.4%).
The Canadian dollar rose 0.6% in September 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 declined 0.4% instead of 0.5%.
12-month change: Industrial Product Price Index continues to decline
Year over year, the IPPI fell 6.1% in September compared with declines of 7.1% in July and 6.7% in August.
The IPPI was pulled down mainly by the prices for petroleum and coal products (-32.1%) and, to a lesser extent, chemical products (-9.7%) and primary metal products (-8.1%). This decline in prices was mainly offset by higher prices for motor vehicles and other transport equipment (+2.3%).
Year over year, prices for products excluding petroleum and coal fell 2.1%, which is comparable to the 2.4% decrease observed in August. The downward trend continues with this fourth consecutive decline.
Since September 2008, the Canadian dollar lost 2.2% of its value against its US counterpart, and if the direct effect of the exchange rate had been excluded, the IPPI would have fallen 6.7% instead of 6.1%.
Raw Materials Price Index: Index retreats as a result of crude oil and vegetable product prices
The Raw Materials Price Index (RMPI) fell 1.1% in September, which is a marked change from the 3.8% increase posted in August.
The volatile movements of the RMPI are mainly due to fluctuations in prices for mineral fuels, especially crude oil. The price for crude oil fell 1.6% in September, following an 8.1% increase in August.
The 5.1% drop in prices for vegetable products also contributed to the decline in the RMPI. In particular, prices for oilseeds (-14.5%) and grains (-3.2%) fell on forecasts of an abundant crop. The drop in the RMPI was tempered by a 0.7% rise in prices for non-ferrous metals. Excluding mineral fuels, the RMPI declined by 0.6%, following a 0.9% rise in August.
From September 2008 to September 2009, raw material prices fell 21.4%, a smaller decrease than the 26.4% year-over-year decline in August. The drop in raw material prices was attributable to the strong 32.0% price reduction for mineral fuels and, to a lesser extent, a 15.9% drop in prices for vegetable products. All main product groups registered year-over-year price declines.
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.