Canadian Industrial Product Price Index Increases in January - Modern Distribution Management

Canadian Industrial Product Price Index Increases in January

Raw materials price index fell 0.4 percent, led by lower prices for crude energy products.

Canada's industrial product price index rose 0.5 percent in January, mainly as a result of higher prices for motorized and recreational vehicles, according to Statistics Canada. The raw materials price index fell 0.4 percent, led by lower prices for crude energy products.

The IPPI increase in January is the first increase since July 2015. Among the 21 major commodity groups, 18 were up and 3 were down.

Of the three major commodity groups that declined in January, energy and petroleum products (-7.3 percent) posted the largest decrease. The decline in this commodity group was mainly due to lower prices for motor gasoline (-8.2 percent), diesel fuel (-10.3 percent) and light fuel oils (-8.2 percent).

The global supply of crude oil continued to outpace demand, resulting in lower prices for crude oil and refined petroleum products. The IPPI excluding energy and petroleum products increased 1.4 percent.

Largely moderating the decline in energy and petroleum products were higher prices for motorized and recreational vehicles (+2.7 percent). Higher prices for passenger cars and light trucks (+2.8 percent), motor vehicle engines and motor vehicle parts (+1.9 percent), as well as aircraft (+3.8 percent) were the main reasons for the increase in motorized and recreational vehicles. Higher prices for motorized and recreational vehicles were closely linked to the depreciation of the Canadian dollar relative to the U.S. dollar.

Also contributing to the increase in the IPPI in January were higher prices for primary non-ferrous metal products (+3.1 percent), specifically unwrought gold and gold alloys (+5.7 percent) and unwrought silver and silver alloys (+4.2 percent). Prices for unwrought gold and gold alloys posted their largest gain in a year, and have increased 7.4 percent since July 2015.

Prices for meat, fish, and dairy products (+1.6 percent) rose for the first time since August 2015, recording their largest increase since May 2015.

From December 2015 to January 2016, the Canadian dollar depreciated 3.8 percent relative to the U.S. dollar. If the exchange rate had remained constant, the IPPI would have decreased 0.4 percent instead of increasing 0.5 percent.

Over the 12-month period ending in January, the IPPI rose 1.7 percent, its second consecutive year-over-year gain.

The main reason for the rise in the IPPI was motorized and recreational vehicles (+11.4 percent), specifically year-over-year increases in the prices for passenger cars and light trucks (+12.6 percent), motor vehicle engines and motor vehicle parts (+6.9 percent), as well as aircraft (+17.5 percent).

Also contributing to the year-over-year increase in the IPPI were higher prices for electrical, electronic, audiovisual and telecommunication products (+6 percent), specifically electronic and electrical parts (+10 percent), and communication and audio and video equipment (+4.8 percent).

Prices for energy and petroleum products were down 10.7 percent year over year, largely moderating the gain in the IPPI. Prices for diesel fuel (-20 percent), light fuel oils (-18.6 percent), heavy fuel oils (-27.4 percent) were the main reasons for the decline.

Also moderating the increase in the IPPI were year-over-year declines in prices for primary ferrous metal products (-9.6 percent), led by prices for iron and steel basic shapes (-13.1 percent), and iron and steel pipe and tube (except castings) (-9.3 percent).

Raw Materials Price Index

The RMPI declined 0.4 percent in January, after falling 5.2 percent in December. Of the six major commodity groups, four were up and two were down.

The decline in the RMPI was mainly attributable to lower prices for crude energy products (-4.2 percent), specifically conventional crude oil (-4.3 percent). The RMPI excluding crude energy products rose 1.8 percent, its first increase since May 2015, and its largest gain since July 2014, when oil prices began to decline.

Largely moderating the decline in the RMPI were higher prices for animals and animal products (+3.7 percent). To a lesser degree, metal ores, concentrates and scrap (+1.2 percent) also moderated the decrease in the RMPI.

The RMPI declined 7.5 percent over the 12-month period ending in January.

Lower prices for crude energy products (-11.9 percent) were largely responsible for the decrease, specifically conventional crude oil (-11.9 percent). The RMPI excluding crude energy products declined 5 percent from the same month last year.

Prices for animals and animal products (-5.4 percent) declined year over year for the seventh consecutive month in January. Also contributing to the year-over-year decline in the RMPI were lower prices for metal ores, concentrates and scrap (-10 percent).

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