Canada March Industrial Product and Raw Materials Prices (Text)

The following is the text of the industrial product and raw material prices report as reported by Statistics Canada.

The Industrial Product Price Index (IPPI) edged up 0.1% in March, led by higher prices for motor vehicles and other transportation equipment. The Raw Materials Price Index (RMPI) fell 1.7%, mostly because of lower prices for crude oil.

Industrial Product Price Index, monthly change

The IPPI posted the third consecutive monthly increase in March, as prices in most commodity groups rose. Of the 21 major commodity groups, 15 were up, 4 were down, and 2 were unchanged.

The motor vehicles and other transportation equipment (+0.9%) was the largest contributor to the IPPI advance in March, which was primarily the result of higher prices for motor vehicles (+1.2%). The depreciation of the Canadian dollar relative to the US dollar was largely responsible for this increase.

Some Canadian producers who export their products report their prices in US dollars. Consequently, the 1.5% decrease in the value of the Canadian dollar relative to the US dollar may have the effect of increasing the IPPI. Without the measurable effect of the exchange rate, the index would have declined 0.3% instead of rising 0.1%.

Pulp and paper products (+1.0%) also contributed to the increase of the IPPI, though to a lesser extent. This increase was mainly attributable to higher prices for pulp (+2.7%).

Among the other product groups that posted gains was lumber and other wood products (+0.9%), particularly lumber and ties (+2.4%), which posted a fifth consecutive monthly increase. Concurrent with the increase in prices for lumber and ties, the number of housing starts was up for the second consecutive month in March.

Conversely, the IPPI advance was moderated primarily by petroleum and coal products (-1.8%), mainly as a result of lower prices for liquefied petroleum gases and diesel fuel. The IPPI excluding petroleum and coal products rose 0.3% in March.

Primary metal products (-1.2%) also declined, mainly because of lower prices for copper and copper alloy products, other non-ferrous metal products, nickel products and aluminum products.

Industrial Product Price Index, 12-month change

Compared with March 2012, the IPPI was up 0.9%, the second consecutive year-over-year increase.

The IPPI advance was largely attributable to lumber and other wood products (+10.5%), specifically lumber and ties (+19.1%). Prices for lumber and ties continued to rise on a year-over-year basis, extending the upward trend that began in March 2012.

Compared with the same month a year earlier, motor vehicles and other transportation equipment (+2.1%) also contributed to the advance of the IPPI. The increase in this product group was mostly a result of the 3.0% depreciation of the Canadian dollar relative to the US dollar. Without the measurable effect of the exchange rate, the IPPI would have edged up 0.1% instead of rising 0.9% on a year-over-year basis.

Among the other commodity groups that posted increases was fruit, vegetable, feeds and other food products (+1.8%). Prices for feed products were up 9.0% on a year-over-year basis, continuing a trend that began in October 2010.

Conversely, the IPPI advance was moderated largely by primary metal products (-4.3%), specifically iron and steel products (-3.3%), other non-ferrous metal products (-3.9%) and aluminum products (-5.2%).

Raw Materials Price Index, monthly change

Following two consecutive monthly increases, the RMPI declined 1.7% in March. Of the seven major commodity groups, four decreased.

The RMPI decline was largely attributable to lower prices for mineral fuels (-1.9%), specifically crude oil (-2.0%). Crude oil inventories in North America continued to increase in March. The RMPI excluding mineral fuels decreased 1.3% in March.

Non-ferrous metals (-2.7%) and animals and animal products (-1.7%) also contributed to the decline of the index, though to a lesser extent.

The decline in non-ferrous metals was led by copper concentrates (-3.5%), zinc concentrates (-4.8%) and other non- ferrous base metals (-5.3%). Almost all non-ferrous metal products posted lower prices in March.

Lower prices for hogs-swine for slaughter (-7.8%) and cattle and calves for slaughter (-1.3%) were the largest contributors to the decline in animals and animal products.

The RMPI decrease was moderated slightly by wood products (+0.1%).

Raw Materials Price Index, 12-month change

Compared with the same month one year earlier, the RMPI decreased 2.0%, continuing the downward trend that began in March 2012.

The RMPI decline was mostly a result of lower prices for mineral fuels (-3.2%), specifically crude oil (-3.0%). Crude oil continued the year-over-year downward trend that began in March 2012. The RMPI excluding mineral fuels fell 0.8% on a year-over- year basis.

Among the other commodity groups that contributed to the year-over-year RMPI decrease were non-ferrous metals (-3.5%) and animals and animal products (-0.8%).

Compared with March 2012, the RMPI decline was moderated slightly by vegetable products (+2.8%) and wood products (+3.5%).

Note to readers

With each release, data for the previous six months may have been revised. The indexes are not seasonally adjusted.

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 indicate their prices in foreign currencies, especially in US dollars, which are then converted into Canadian dollars. In particular, this is the case for motor vehicles, pulp, paper and wood products. Therefore, a rise or fall in the value of the Canadian dollar against its US counterpart affects the IPPI. But the conversion into Canadian dollars only reflects how respondents provide their prices. This is not a measure that takes the full effect of exchange rates into account.

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 release, 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 those prices are set on the world market. However, as few prices are denominated in foreign currencies, their conversion into Canadian dollars has only a minor effect on the calculation of the RMPI.

To contact the reporter on this story: Ilan Kolet in Ottawa at ikolet@bloomberg.net

To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net

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