- The Industrial Product Price Index (IPPI) in Canada experienced a 0.1% month-over-month increase in March 2023, while the Raw Materials Price Index (RMPI) decreased by 1.7% during the same period.
- Key sectors influencing the IPPI included primary ferrous metal products, energy and petroleum products, and meat, fish, and dairy products, while crude energy products and crop products significantly impacted the RMPI.
- Fluctuations in the IPPI and RMPI were driven by a combination of factors, such as price changes in various sectors, exchange rate movements, and global market forces.
Editor’s Notes: In this report, we have used data from the Statistics Canada website.
The Industrial Product Price Index (IPPI) measures the prices of products manufactured in Canada, while the Raw Materials Price Index (RMPI) captures the prices of raw materials purchased by Canadian manufacturers. In March 2023, the Industrial Product Price Index increased by 0.1%, and the RMPI decreased by 1.7%. This article examines the factors influencing these changes and their implications for different sectors.
Industrial Product Price Index: Excluding Energy and Petroleum Products
When excluding energy and petroleum products, the IPPI experienced a 0.4% growth in March 2023. This increase can be attributed to various factors, such as price changes in primary ferrous metal products, motorized and recreational vehicles, and meat, fish, and dairy products. A detailed analysis of these sectors will provide further insight into the Industrial Product Price Index’s performance.
Primary Ferrous Metal Products: Steel Prices on the Rise
From February to March 2023, prices for primary ferrous metal products, including steel products, increased by 4.3%. Several North American steel mills raised their prices during this period, responding to increased demand from industries such as automotive and construction. Additionally, supply chain disruptions and higher raw material costs contributed to the steel price increase. It also increases the Industrial Product Price Index.
Energy and Petroleum Products: Price Fluctuations
In March 2023, energy and petroleum product prices fell by 2.7%. Finished motor gasoline prices rose by 3.6%, while diesel prices decreased by 5.1%. The crude oil cost component of retail gasoline and diesel fell by 2.3%, influenced by factors such as global oil production levels, geopolitical tensions, and fluctuating market demand. Refining margins for gasoline and diesel also experienced changes, with gasoline refining margins rising by 14.9% and diesel refining margins decreasing by 7.2%. It affects the Industrial Product Price Index of Canada.
Softwood Lumber: Decreased Prices Amid a Slowing Housing Market
Softwood lumber prices experienced an 8.1% decline in March 2023 due to increasing interest rates and a slowing residential housing market in the United States and Canada. US housing starts were down 17.2% year over year, resulting in decreased demand for lumber. Additionally, the expiration of tariffs on Canadian lumber imports to the US further contributed to the price decrease.
Motorized and Recreational Vehicles: Price Increases and Exchange Rate Impact
Prices for motorized and recreational vehicles increased by 0.6% in March. The Canadian dollar depreciated 1.7% against the US dollar during this period, contributing to the price increase, as many prices in this category are reported in US dollars. Vehicle manufacturers also faced higher production costs due to rising raw material prices and supply chain disruptions. The price increase also influences the Industrial Product Price Index.
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Primary Non-Ferrous Metal Products: Mixed Price Movements
Price movements for primary non-ferrous metal products were mixed in March. Nickel prices fell by 11.3% due to strong global supply and slowing demand from industries such as stainless steel production. In contrast, safe-haven metals like gold and silver experienced price increases of 4.9% and 1.8%, respectively, driven by investor concerns over bank failures in the United States and a pessimistic macroeconomic outlook.
Meat, Fish, and Dairy Products: Price Increases and Supply-Demand Dynamics
Prices for meat, fish, and dairy products increased by 1.1% in March. Fresh and frozen beef and veal prices rose 7.4%, driven by tightened supply and strong seasonal demand, particularly from the US market. Factors such as rising input costs, shrinking cattle inventories, and weather-related disruptions in livestock production contributed to the upward trend in beef prices. On the other hand, fresh and frozen pork prices declined by 2.2% in March, influenced by ample supply and the impact of US pork cold storage levels.
Raw Materials Price Index: Consecutive Monthly Declines
The RMPI experienced its fifth consecutive monthly decline in March 2023, decreasing by 1.7% monthly. Year over year, the index declined by 16.5%. Factors such as falling crude energy product prices and decreasing crop product prices contributed to the overall decline in the RMPI.
Crude Energy Products and Crop Products: Price Changes and Market Influences
Crude energy product prices fell 3.3% in March, with conventional crude oil prices declining by 3.4% month over month and 28.2% year over year. Pessimism stemming from bank failures in the United States played a part in the crude oil price decrease. In contrast, crop product prices experienced a 3.9% decrease in March, with widespread price drops for commodities such as canola, grains, and wheat. Global canola supply and the extension of the Black Sea Grain Initiative contributed to lower crop product prices.
In conclusion, the Industrial Product Price Index’s performance in March 2023 can be attributed to various factors, including price fluctuations in various sectors, exchange rate movements, and global market forces. Understanding these trends and their implications is essential for businesses, policymakers, and investors to make informed decisions in the current economic climate. However, Industrial Product Price Index plays an important role in the economy of the country.