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CA: Industrial Product Price Index
| Actual | Previous | Revised | |
| IPPI - M/M | -1.4% | 1.2% | 1.4% |
| IPPI - Y/Y | 12.4% | 13.6% | 14.3% |
| Raw Materials Price Index - M/M | -6.9% | 0.7% | 0.5% |
| Raw Materials Price Index - Y/Y | 20.7% | 33.4% |
Highlights
The Industrial Product Price Index (IPPI) fell back 1.4 percent in June against the background of seemingly improving prospects related to the Middle East conflict that pushed oil prices down. Industrial prices were up 12.4 percent year-over-year after rising 14.3 percent in May.
After five consecutive months of increases, energy and petroleum product prices fell 9.1 percent on the month, while still up 36.8 percent year-over-year. Excluding this category, the IPPI edged down just 0.1 percent on the month, for a 12-month gain of 9.5 percent.
In June, the United States and Iran announced a tentative deal that improved prospects for shipping through the Strait of Hormuz, easing pressure on energy prices, with refined petroleum energy, down 10.3 persent, contributed the most to the decline.
Prices were down in six other industrial categories, including a 4.7 percent drop in primary non-ferrous metal product prices, the largest monthly decrease since July 2022, owing to a 9.8 percent fall in unwrought gold, silver, and platinum group metals, and their alloys, the largest decline since October 2011 and the fifth consecutive monthly retreat.
Elsewhere, prices increased in 13 categories, including lumber and other wood products, up 2.6 percent as softwood lumber rose 6.1 percent, the largest monthly gain since November 2024.
The Raw Materials Price Index (RMPI) also declined in June, by 6.9 percent from May, while rising 20.7 percent year-over-year.
Excluding a 13.7 percent drop in crude energy, the RMPI was down 2.7 percent on the month. On a 12-month basis, crude energy increased 25.1 percent and the overall RMPI was up 18.6 percent.
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.