| Actual | Previous | |
|---|---|---|
| IPPI - M/M | 0.4% | -0.5% |
| IPPI - Y/Y | 1.7% | 1.2% |
| Raw Materials Price Index - M/M | 2.7% | -0.4% |
| Raw Materials Price Index - Y/Y | 1.1% | -2.8% |
Highlights
Canada's Industrial Product Price Index (IPPI) rebounded 0.4 percent in June after declining 0.5 percent in May, for a 12-month advance of 1.7 percent, up from 1.3 percent the previous month. The price gain acceleration comes on the back of an inflation acceleration at the retail level, with the headline CPI rising to 1.9 percent in June after 1.7 percent in May, while core measures remained noticeably above the Bank of Canada's 2 percent target.
Energy and petroleum prices were up 1.1 percent on the month and down 7.6 percent year-over-year. The IPPI excluding petroleum and energy products increased 0.3 percent from May and 3.0 percent from a year earlier.
Today's report provides new elements about the impact of trade tensions. A 2.8 percent gain in prices for primary non-ferrous metal products led the monthly IPPI advance in June, with unwrought platinum group metals and their alloys (up 15.6 percent) posting their largest month-over-month increase since September 2012. Prices for unwrought silver and silver alloys also appreciated and tightened global supply for platinum contributed to the sharp price increase.
Year-over-year unwrought gold, silver, and platinum group metals, and their alloys surged 30.9 percent, the largest upward contributor to the 12-month IPPI increase. High gold prices fostered"strong safe-haven investment demand".
Raw materials prices were up 2.7 percent in June from May and 1.1 percent from a year earlier, respectively. Excluding a monthly 6.8 percent advance and a 15.2 percent 12-month drop in crude energy products, the raw materia prices increased 0.8 percent on the month and 11.8 percent year-over-year.
Metal ores, concentrates and scrap were up 1.4 percent on the month, driven by gains in silver, which began rising last year in response to industrial demand and a global supply deficit. Statistics Canada also pointed out that increased safe-haven investment related to concerns that U.S. tariffs could negatively impact global trade drove prices boosted silver prices.
Canada imposed tariffs on U.S. steel and aluminum imports earlier this year in response to U.S. tariffs.
Energy and petroleum prices were up 1.1 percent on the month and down 7.6 percent year-over-year. The IPPI excluding petroleum and energy products increased 0.3 percent from May and 3.0 percent from a year earlier.
Today's report provides new elements about the impact of trade tensions. A 2.8 percent gain in prices for primary non-ferrous metal products led the monthly IPPI advance in June, with unwrought platinum group metals and their alloys (up 15.6 percent) posting their largest month-over-month increase since September 2012. Prices for unwrought silver and silver alloys also appreciated and tightened global supply for platinum contributed to the sharp price increase.
Year-over-year unwrought gold, silver, and platinum group metals, and their alloys surged 30.9 percent, the largest upward contributor to the 12-month IPPI increase. High gold prices fostered"strong safe-haven investment demand".
Raw materials prices were up 2.7 percent in June from May and 1.1 percent from a year earlier, respectively. Excluding a monthly 6.8 percent advance and a 15.2 percent 12-month drop in crude energy products, the raw materia prices increased 0.8 percent on the month and 11.8 percent year-over-year.
Metal ores, concentrates and scrap were up 1.4 percent on the month, driven by gains in silver, which began rising last year in response to industrial demand and a global supply deficit. Statistics Canada also pointed out that increased safe-haven investment related to concerns that U.S. tariffs could negatively impact global trade drove prices boosted silver prices.
Canada imposed tariffs on U.S. steel and aluminum imports earlier this year in response to U.S. tariffs.
Definition
The Industrial Product Price Index (IPPI) reflects the prices that producers in Canada receive as the goods leave the plant gate. 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. The report also contains a measure of domestic producers' raw material costs (RMPI) which can be seen as a very loose leading indicator of the IPPI.
Description
The IPPI reflects the prices that Canadian producers receive when goods leave the factory gate, that is, what producers receive for their output. This index is similar to the United Kingdom's producer output index. The index includes prices for major commodities sold by manufacturers, but it excludes indirect taxes and items such as transportation and wholesale and retail costs. The index is affected by the foreign exchange rate of the Canadian dollar versus the U.S. dollar, and each month its impact is noted. The RMPI reflects the prices paid by Canadian manufacturers for key raw materials, either domestically or in world markets. It is published simultaneously with the IPPI and, like that index, has a base year of 1997 and is subject to revisions for six months. This index is analogous to the producer input price index published in the United Kingdom.
The IPPI and RMPI measure prices at the producer level before they are passed along to consumers. Since these indexes measure prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months.
While the CPI is the price index with the most impact in setting interest rates, the PPI provides significant information earlier in the production process. As a starting point, interest rates have an"inflation premium" and components for risk factors. A lender will want the money paid back from a loan to at least have the same purchasing power as when loaned. The interest rate at a minimum equals the inflation rate to maintain purchasing power and this generally is based on the CPI. Changes in inflation lead to changes in interest rates and, in turn, in equity prices.
The PPI is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or they taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace.
The IPPI and RMPI measure prices at the producer level before they are passed along to consumers. Since these indexes measure prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months.
While the CPI is the price index with the most impact in setting interest rates, the PPI provides significant information earlier in the production process. As a starting point, interest rates have an"inflation premium" and components for risk factors. A lender will want the money paid back from a loan to at least have the same purchasing power as when loaned. The interest rate at a minimum equals the inflation rate to maintain purchasing power and this generally is based on the CPI. Changes in inflation lead to changes in interest rates and, in turn, in equity prices.
The PPI is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or they taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace.
