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Canada’s January producer price index dampened by 3% drop in paper, lumber prices


March 4, 2003
By Pulp & Paper Canada

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Statistics Canada reported on “Industrial product and raw materials price indexes,” for January 2003.

Statistics Canada reported on “Industrial product and raw materials price indexes,” for January 2003.

Led by higher prices for petroleum products, manufacturers’ prices, as measured by the Industrial Product Price Index (IPPI), rose in January (+0.3%) following two months of decrease. On an annual basis, the IPPI rose 2.0%, its sixth consecutive increase.
From a monthly perspective, higher prices for petroleum and coal products (+7.5%) had a major impact, followed to a lesser degree by chemical products (+1.2%), primary metal products (+0.9%) and meat, fish and dairy products (+0.7%). Lower prices for motor vehicles and other transport equipment (-1.1%), pulp and paper products (-1.0%) and electrical and communication products (-0.7%) partly offset those monthly increases.
Strong contributors to the year-over-year growth were petroleum and coal products (+32.4%) and primary metal products (+6.7%). Fruit, vegetable and feed products (+4.5%) and chemical products (+3.3%) also contributed to the annual growth in manufacturers’ prices. However, lower prices for motor vehicles and other transport equipment (-2.8%), pulp and paper products (-3.0%) and lumber and other wood products (-3.2%) dampened the increase.
From January 2002 to January 2003, petroleum and coal product prices rose 32.4%, the largest year-over-year increase since November 2000. If petroleum and coal product prices had been excluded, the year-over-year increase would have been 0.2% instead of 2.0%.
Manufacturers paid 22.2% more for their raw materials than they did in January 2002, following an increase of 18.6% in December. Higher prices for mineral fuels (+46.7%) were mainly responsible for this annual rise in the Raw Materials Price Index (RMPI). Increases for vegetable products, wood products and animal products also contributed to the annual increase. If mineral fuels had been excluded, the RMPI would have increased 6.4%.
On a monthly basis, raw materials prices were up 5.2% from December. Mineral fuels were the major contributors to the monthly increase, with prices up 9.8%. Prices for animal products, more specifically cattle and hogs, were also higher in January than in December. Vegetable products partly offset this monthly increase, mainly as a result of lower prices for canola, soybeans and wheat.
The IPPI (1997=100) stood at 108.4 in January, up from its revised level of 108.1 in December. The RMPI (1997=100) rose to 125.6 in January from its revised level of 119.4 in December.
Monthly crude oil prices are up but prices for lumber products are down slightly
In the RMPI, crude oil prices were 11.3% higher in January than in December, mainly the result of concerns over supply and colder winter temperatures. On a year-over-year basis, crude oil prices were up 64.0%, the largest increase since June 2000.
In the IPPI, lumber and other wood product prices were down slightly (-0.1%) from December. Lower prices for softwood lumber were offset by higher prices for particleboard and softwood plywood. On an annual basis, lumber and other wood products prices were down 3.2%.
Impact of exchange rate pushes down prices
From December to January, the value of the US dollar weakened against the Canadian dollar, pushing down prices of commodities that are quoted in US dollars. As a result, the total IPPI excluding the effect of the exchange rate would have increased 0.7% instead of 0.3%.
On a 12-month basis, the influence of the dollar had a larger impact. The IPPI excluding the effect of the exchange rate would have increased 2.9% rather than 2.0% from January 2002 to January 2003.
Finished goods continue to increase from a year ago
Rising prices for petroleum products, tobacco products, meat, fish and dairy products and fruit, vegetable and feed products pushed year-over-year prices for finished goods up 0.7% from January 2002. These increases were partly offset by lower prices for motor vehicles as well as electrical and communication products.
On a monthly basis, prices for finished goods were down slightly (-0.1%) from December. Lower prices for motor vehicles and electrical and communication products were mainly offset by higher prices for petroleum products and meat, fish and dairy products.
“Finished goods” are those generally purchased for the purpose of either consumption or investment. Most of the foods and feeds category ends up in the hands of consumers. Most capital goods are equipment and machinery generally bought by companies, government agencies, or governments. Much of the remainder is bought by consumers.
Prices for intermediate goods increase
Producers of intermediate goods received 2.8% more for their goods in January than in January 2002, the fifth consecutive year-over-year increase. Higher prices for petroleum products, primary metal products, fruit, vegetable and feed products and chemical products were the major contributors to this annual rise. Lower prices for lumber products, pulp and paper products and motor vehicles partly offset this increase.
Prices for intermediate goods rose 0.5% from December. Higher prices for petroleum products, primary metal products and chemical products were partly offset by lower prices for motor vehicles, pulp and paper products and fruit, vegetable and feed products.
“Intermediate goods,” sometimes referred to as “input goods,” are goods that are generally bought by manufacturers to be further used in the production process, that is, to make other goods.

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