The latest data of Statistics Canada reveals notable shifts in prices for Canadian-manufactured products and raw materials during August 2024. The Industrial Product Price Index (IPPI) and the Raw Materials Price Index (RMPI) both saw significant declines on a month-to-month basis, driven by falling energy costs, soft commodity prices, and ongoing concerns about the global economy, particularly in China.
The Industrial Product Price Index (IPPI), which tracks the prices manufacturers in Canada receive for their products, dropped by 0.8% in August compared to the previous month. This marked a more pronounced decline than July’s marginal dip of 0.1%. However, on an annual basis, the IPPI managed a slight 0.2% increase, marking its fifth consecutive yearly gain, though the growth remains tepid.
The primary driver of the monthly downturn was the steep reduction in energy and petroleum product prices. The price of energy products plummeted by 5.0%, the largest monthly decline since December 2023. This fall was primarily influenced by reductions in the prices of refined petroleum products, with diesel fuel prices dropping by 7.4% and finished motor gasoline prices by 4.2%.
Canada’s energy market is especially susceptible to global fluctuations, and August’s downturn can be linked to a combination of international factors. Chief among these are concerns surrounding the slowing of China’s economy, which has weakened demand for key commodities such as oil and metals. With China being the largest consumer of copper, the price of this essential industrial metal suffered a substantial monthly drop of 4.7%, contributing to a broader 1.6% decrease in the price of non-ferrous metal products. Notably, the prices of unwrought gold, silver, and platinum group metals also saw a decline, falling by 1.3%.
In a surprising development, the meat, fish, and dairy products sector also contributed to the overall decline in the IPPI. Prices in this sector dropped 1.7%, with beef and veal products seeing the sharpest monthly reduction of 4.9%—the largest fall since January 2024. Analysts attributed this drop to a typical seasonal lull in demand, though beef prices remain elevated compared to historical norms.
Amidst the broader declines, certain sectors posted gains that helped moderate the overall drop in the IPPI. Lumber and wood product prices increased by 2.1%, spurred largely by a 7.7% rise in softwood lumber prices. This came after four consecutive months of price drops in the lumber sector, reflecting renewed demand and easing supply chain constraints.
Similarly, the chemical sector also saw an uptick in prices, largely driven by a 1.0% rise in chemical products. In particular, plastic resins rose 4.1%, a development attributed to higher input costs and limited supply from the United States.
Despite the monthly decline, the IPPI has shown resilience over the past year, growing by 0.2% on an annual basis. This is largely due to significant price increases in certain key commodities, including precious metals. Over the past 12 months, unwrought gold, silver, and platinum group metals have risen by 24.0%, while unwrought aluminum has surged by 33.2%. These gains were fueled by continued economic and geopolitical uncertainty, which drove investors toward safe-haven assets like gold.
However, the energy sector continues to struggle. Diesel fuel prices dropped by 17.1% year over year, while finished motor gasoline prices fell 11.8%. Grain and oilseed products saw the most significant price decrease, plummeting by 26.9% compared to August 2023, largely due to oversupply in global markets.
The Raw Materials Price Index (RMPI), which measures the prices manufacturers pay for raw materials, experienced an even steeper decline than the IPPI. The RMPI dropped by 3.1% month over month in August, primarily driven by a 5.0% reduction in crude energy product prices. Excluding crude energy products, the RMPI still fell by 1.8%.
The decline in crude energy prices was fueled by concerns over sluggish global economic growth, particularly in China, where weakened demand for oil and other energy products exerted significant downward pressure on prices. Conventional crude oil prices dropped by 5.6%, while synthetic crude prices declined by 3.5%.
Additionally, crop product prices saw a sharp monthly decrease of 6.1%, the largest decline since July 2022. Canola prices led this drop, falling by 8.9% as global production of oilseeds exceeded expectations. The United States Department of Agriculture (USDA) revised its projections for the 2024/2025 crop year, increasing its estimates for oilseed output, which in turn pressured prices downward.
Prices for metal ores, concentrates, and scrap also contributed to the monthly RMPI decline, decreasing by 2.3%. This was largely driven by falling prices for gold, silver, and platinum group metal ores, which fell by 2.5%.
On an annual basis, the RMPI fell by 2.5%, reversing a 4.1% gain in July. The primary drivers of this year-over-year decline were lower prices for crude energy products, particularly conventional crude oil (-5.9%) and synthetic crude oil (-8.5%). Additionally, canola prices saw a steep yearly drop of 26.5%, while nickel ores and concentrates fell by 19.1%, reflecting elevated supply levels in both markets.
Conversely, certain sectors saw price increases over the past year. Prices for gold, silver, and platinum group metal ores rose by 25.9%, continuing the trend of rising precious metal prices amidst global instability. Prices for cattle and calves also increased, rising by 11.2% as demand remained robust.
The shifts in the IPPI and RMPI reflect broader trends in both the Canadian and global economies. Canada’s heavy reliance on commodity exports makes its manufacturing sector particularly sensitive to fluctuations in global demand. The ongoing uncertainty surrounding China’s economic outlook continues to weigh heavily on commodity markets, particularly for energy and metal products.
At the same time, supply chain improvements and easing input costs have provided some relief to specific sectors, such as lumber and chemicals. However, the mixed picture suggests that while certain commodities may rebound in the coming months, others, particularly energy products, will likely remain under pressure as global economic uncertainties persist.
Manufacturers and policymakers alike will be closely monitoring these developments, especially as Canada navigates its recovery from the global economic downturn and seeks to stabilize its domestic market in the face of these ongoing challenges.