Canada's industrial product price index decreased 0.5 percent in August, according to Statistics Canada. Of the 21 major commodity groups, 2 were up, 11 were down and 8 were unchanged..
The decline in the IPPI in August was mainly attributable to prices for meat, fish, and dairy products (-2.3 percent), which posted their largest decrease since October 2007. The main reason for the lower prices in this commodity group was fresh and frozen pork (-5.8 percent) and, to a lesser extent, fresh and frozen beef and veal (-2.8 percent). The price of fresh and frozen beef and veal began a downward trend in September 2015, recording a 17.9 percent year-over-year decline in August 2016. This decrease coincided with a 25.5 percent year-over-year drop in the price of cattle and calves in August. Prices for fresh and frozen pork have fallen 0.3 percent since August 2015; however, they were down 8.6 percent over the past two months (July and August 2016).
Energy and petroleum products (-1.3 percent) also exerted downward pressure on the IPPI, as prices for heavy fuel oils (-4.9 percent), light fuel oils (-1.6 percent), diesel fuel (-1.6 percent) and motor gasoline (-0.5 percent) fell in August. The IPPI excluding energy and petroleum products declined 0.3 percent.
Prices for motorized and recreational vehicles fell 0.3 percent in August, mainly because of lower prices for passenger cars and light trucks (-0.3 percent), motor vehicle engines and motor vehicle parts (-0.2 percent), and aircraft (-0.4 percent). Lower prices for motorized and recreational vehicles were closely linked to the appreciation of the Canadian dollar relative to the US dollar.
Also contributing to the decline in the IPPI in August were lower prices for fruit, vegetables, feed and other food products (-0.4 percent), specifically other animal feed (-3.4 percent). Lower prices for grain and oilseed products (not elsewhere classified) (-0.6 percent), specifically oilseed cake and meal (-5.1 percent), also contributed to the decline, but to a much lesser extent.
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 July to August, the Canadian dollar appreciated 0.4 percent relative to the US dollar. If the exchange rate had remained constant, the IPPI would have declined 0.4 percent instead of falling 0.5 percent.
The IPPI declined 1.3 percent over the 12-month period ending in August, after falling 1.3 percent in July.
The year-over-year decrease in the IPPI was largely attributable to lower prices for energy and petroleum products (-9.8 percent). Motor gasoline (-12.4 percent), diesel fuel (-5.4 percent) and heavy fuel oils (-13.3 percent) were the main reasons for the decline in this commodity group. The IPPI excluding energy and petroleum products fell 0.1 percent.
Also contributing to the decline were lower prices for meat, fish, and dairy products (-3.8 percent) and chemicals and chemical products (-3.8 percent). Prices for fresh and frozen beef and veal (-17.9 percent) were the main reason for the decrease in meat, fish, and dairy products, while ammonia and chemical fertilizers (-21.3 percent), petrochemicals (-6.6 percent), and plastic resins (-7 percent) led the fall in chemicals and chemical products.
Moderating the year-over-year decline in the IPPI were higher prices for primary non-ferrous metal products (+6 percent). The main reason for the increase was unwrought precious metals and precious metal alloys (+18.3 percent), while lower prices for unwrought copper and copper alloys (-7.5 percent), and basic and semi-finished products of aluminum and aluminum alloys (-8.7 percent) moderated the gain.
Raw Materials Price Index
The Raw Materials Price Index (RMPI) fell 0.7 percent in August, after declining 2.7 percent in July. Of the six major commodity groups, one was up, and five were down.
The decline in the RMPI was led by lower prices for animals and animal products (-3.7 percent), specifically hogs (-14.4 percent) and, to a much lesser extent, cattle and calves (-1.6 percent). This was the largest decrease in the price of hogs since November 2015, when prices fell 15.2 percent. According to the July 2016 livestock estimates, the number of hogs in Canada was up 1.9 percent from July 1, 2015. Higher inventories, combined with lower feed costs, put downward pressure on the price of hogs.
Also contributing to the decline in August were lower prices for crop products (-2.9 percent), specifically oilseeds (except canola and soybeans) (-9.2 percent) and grains (except wheat) (-4.6 percent). The decrease in grains was widespread, as prices for other grains, not elsewhere classified (-10 percent), oats (-5.9 percent), barley (-2.9 percent) and grain corn (-1.2 percent) fell in August.
Moderating the decline in the RMPI were higher prices for crude energy products (+1.4 percent), specifically conventional crude oil (+1.2 percent). The RMPI excluding crude energy products decreased 1.9 percent in August.
The RMPI posted its first year-over-year gain since July 2014, increasing 0.6 percent in August.
Higher prices for crude energy products (+5.1 percent), specifically conventional crude oil (+5.7 percent), were the largest contributor to the increase in the RMPI in August. The RMPI excluding crude energy products declined 2.2 percent.
The increase in the RMPI in August was also the result of higher prices for metal ores, concentrates and scrap (+5.5 percent).
Largely moderating the year-over-year gain in August were lower prices for animals and animal products (-10.3 percent), mainly cattle and calves (-25.5 percent) and hogs (-15.4 percent).
Crop products (-3 percent) declined as well in August, as prices for other crop products (-2.8 percent), wheat (-9.6 percent) and canola (including rapeseed) (-8.3 percent) decreased compared with the same month last year.
