Canadian goods, raw materials prices skyrocket

RP news wires, Noria Corporation

In April, a second consecutive strong monthly increase in petroleum prices caused indexes for manufactured goods and raw materials prices in Canada to reach record levels. This is according to data released May 30 by Statistics Canada.

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From March to April, prices charged by manufacturers, as measured by the Industrial Product Price Index (IPPI), rose 1.4 percent. While down slightly from the 1.8 percent increase observed in March, the growth in prices remained strong for a second consecutive month, pushing the IPPI above its last historical peak reached in April 2007. This increase was almost entirely driven by petroleum and coal products, which continued their upward climb with an increase of 7.9 percent, similar to the rate recorded in March.

Prices of other IPPI products, with the exception of energy, grew 0.5 percent; a lower rate of growth compared with the 1.0 percent increase registered in March, and also lower than the average increase observed for the first three months of 2008. Chemical products and motor vehicles and other transport equipment contributed the most to the rise of the IPPI excluding prices for petroleum and coal products.

On a 12-month-basis, the IPPI rose 1.0 percent, an acceleration compared with the 0.2 percent decline recorded in March. The strong rise in prices for petroleum and coal products was partly offset by decreases in the prices for motor vehicles and other transport equipment as well as primary metal products. If energy products were excluded, the IPPI would show a steady decline in prices since September 2007.

The Canadian dollar lost 1.2 percent of its value in relation to the US dollar in April, after falling 0.3 percent in March. If the exchange rate used to convert these prices had remained unchanged, the IPPI would have risen 1.1 percent compared with March instead of an increase of 1.4 percent. However, on a 12-month basis, the Canadian dollar rose 10.6 percent compared with the US dollar, and excluding the effect of the exchange rate, the IPPI would have risen 4.0 percent rather than increasing 1.0 percent.


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 U.S. counterpart affects the IPPI.

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 not produced in Canada.


The Raw Materials Price Index (RMPI) continued its upward trend with a month-over-month increase of 5.1 percent in April, after registering a 6.7 percent rise in March. The RMPI reached a new historical peak, up 22.5 percent from its last low point in September 2007. The increase of the RMPI in April was mainly driven by strong prices for mineral fuels, which rose significantly for a second consecutive month. If mineral fuels were excluded, the RMPI would have fallen 1.2 percent and would have registered its first decline after four consecutive monthly increases.

Compared with April 2007, raw materials cost plants 23.0 percent more. The rise in the index was primarily driven by higher prices for mineral fuels and vegetable products.

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Industrial product price indexes

(1997=100)

  Relative importance April 2007 March 2008r April 2008p April 2007 to April 2008 March to April 2008
          % change
Industrial Product Price Index (IPPI) 100.00 118.4 117.9 119.6 1.0 1.4
IPPI excluding petroleum and coal products 94.32 112.2 109.1 109.6 -2.3 0.5
Aggregation by commodities            
Meat, fish and dairy products 5.78 112.0 109.2 109.2 -2.5 0.0
Fruit, vegetables, feeds and other food products 5.99 108.1 117.6 117.4 8.6 -0.2
Beverages 1.57 124.8 125.9 125.9 0.9 0.0
Tobacco and tobacco products 0.63 203.4 217.8 217.8 7.1 0.0
Rubber, leather and plastic fabricated products 3.30 116.8 115.7 115.9 -0.8 0.2
Textile products 1.58 100.4 99.4 99.7 -0.7 0.3
Knitted products and clothing 1.51 104.6 105.0 104.9 0.3 -0.1
Lumber and other wood products 6.30 85.8 80.3 80.7 -5.9 0.5
Furniture and fixtures 1.59 120.0 120.9 120.9 0.8 0.0
Pulp and paper products 7.23 106.7 103.2 103.9 -2.6 0.7
Printing and publishing 1.70 117.3 115.8 117.5 0.2 1.5
Primary metal products 7.80 161.4 149.6 149.2 -7.6 -0.3
Metal fabricated products 4.11 125.6 126.3 128.0 1.9 1.3
Machinery and equipment 5.48 107.2 103.7 103.9 -3.1 0.2
Motor vehicles and other transport equipment 22.16 92.3 85.8 86.5 -6.3 0.8
Electrical and communications products 5.77 94.3 89.4 89.8 -4.8 0.4
Non-metallic mineral products 1.98 123.0 124.1 124.1 0.9 0.0
Petroleum and coal products1 5.68 233.0 281.2 303.3 30.2 7.9
Chemicals and chemical products 7.07 127.9 132.6 135.6 6.0 2.3
Miscellaneous manufactured products 2.40 115.3 118.8 118.7 2.9 -0.1
Miscellaneous non-manufactured products 0.38 475.5 354.2 341.7 -28.1 -3.5
Intermediate goods2 60.14 123.9 124.3 126.1 1.8 1.4
First-stage intermediate goods3 7.71 170.7 156.1 158.1 -7.4 1.3
Second-stage intermediate goods4 52.43 116.8 119.5 121.3 3.9 1.5
Finished goods5 39.86 110.2 108.4 109.8 -0.4 1.3
Finished foods and feeds 8.50 116.2 116.6 116.8 0.5 0.2
Capital equipment 11.73 100.7 95.5 96.0 -4.7 0.5
All other finished goods 19.63 113.4 112.7 115.1 1.5 2.1
r revised
p preliminary
1. This index is estimated for the current month.
2. Intermediate goods are goods used principally to produce other goods.
3. First-stage intermediate goods are items used most frequently to produce other intermediate goods.
4. Second-stage intermediate goods are items most commonly used to produce final goods.
5. Finished goods are goods most commonly used for immediate consumption or for capital investment.

Raw materials price indexes

(1997=100)

  Relative importance April 2007 March 2008r April 2008p April 2007 to April 2008 March to April 2008
          % change
Raw Materials Price Index (RMPI) 100.00 174.0 203.6 214.0 23.0 5.1
Mineral fuels 35.16 251.5 350.8 387.3 54.0 10.4
Vegetable products 10.28 97.3 141.8 135.8 39.6 -4.2
Animals and animal products 20.30 111.6 104.1 104.6 -6.3 0.5
Wood 15.60 85.7 81.5 80.9 -5.6 -0.7
Ferrous materials 3.36 146.2 150.8 157.5 7.7 4.4
Non-ferrous metals 12.93 262.0 226.6 221.5 -15.5 -2.3
Non-metallic minerals 2.38 147.1 162.9 163.2 10.9 0.2
RMPI excluding mineral fuels 64.84 138.1 135.5 133.9 -3.0 -1.2
r revised
p preliminary

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