Prices for industrial products and raw materials in Canada exhibited varied trends in July 2024, with certain sectors experiencing notable shifts driven by geopolitical factors and seasonal demand.
In July 2024, Canada’s Industrial Product Price Index (IPPI) and Raw Materials Price Index (RMPI) presented a complex picture of the nation’s manufacturing landscape. The IPPI, a key indicator measuring the prices of products manufactured in Canada, remained unchanged from the previous month, reflecting a delicate balance between rising energy costs and declining prices in other sectors. On a year-over-year basis, however, the IPPI posted a 2.9% increase, indicating persistent inflationary pressures within the industrial sector.
Energy and petroleum products played a crucial role in maintaining the stability of the IPPI in July. After two consecutive months of decline, prices in this category rose by 2.0% month over month, driven primarily by a 2.5% increase in finished motor gasoline and diesel fuel prices. The rise in gasoline prices can be attributed to heightened demand during the summer months. This trend is further supported by data from the U.S. Energy Information Administration (EIA), which reported that global consumption of petroleum and other liquid fuels outpaced production from May to July 2024. Additionally, U.S. gasoline stocks have been declining since the beginning of the year, falling by 2.7% in July compared to the previous month, adding upward pressure on prices.
Despite these increases, the overall IPPI remained unchanged due to significant price declines in other sectors. Notably, the lumber and wood products category saw a 3.4% decrease, driven by a sharp 7.8% drop in softwood lumber prices. This marks the fourth consecutive monthly decline for softwood lumber, reflecting a slowdown in the housing markets in both Canada and the United States. Data from the Canada Mortgage and Housing Corporation revealed a 1.5% decline in seasonally adjusted housing starts in Canada from the first to the second quarter of 2024. Meanwhile, U.S. housing starts dropped by 4.8% during the same period, reaching their lowest level since the second quarter of 2020.
The chemicals and chemical products sector also experienced price declines, with a 0.7% drop in July 2024. This decrease was primarily driven by a significant 14.8% reduction in prices for ammonia and chemical fertilizers, marking the largest monthly decline since August 2022. Fertilizer prices typically fall in July due to reduced seasonal demand, and this trend was evident once again this year. However, the impact of these lower prices was partially offset by a 5.0% increase in petrochemical prices, which were influenced by the rising costs of crude energy products.
In contrast, the prices of meat, fish, and dairy products decreased by 0.4% from June to July, following four consecutive months of increases. The decline was largely driven by a 3.6% drop in fresh and frozen beef and veal prices, a result of weakened demand. Despite this, cattle and calf prices continued their upward trajectory, rising by 0.4% for the sixth consecutive month. This increase is attributed to a tight supply of cattle, as evidenced by reduced slaughter numbers in both Canada and the United States.
The primary non-ferrous metals sector saw a modest 0.1% increase in prices in July, with higher prices for unwrought gold, silver, and platinum group metals being largely offset by a 6.5% decline in nickel prices. Gold prices, in particular, benefited from growing speculation that the U.S. Federal Reserve might cut interest rates in the near future, as well as heightened geopolitical tensions in the Middle East, which bolstered safe-haven demand for the precious metal. Meanwhile, nickel prices remained under pressure due to abundant supply from Indonesian producers.
On a year-over-year basis, the IPPI’s 2.9% rise in July 2024 was primarily driven by significant price increases in key commodities. Unwrought gold, silver, and platinum group metals saw a 25.3% increase, reflecting broader economic and geopolitical uncertainties that have fueled demand for these precious metals. Similarly, unwrought aluminum and aluminum alloys experienced a 26.3% rise in prices, while petrochemicals and diesel fuel prices also contributed to the upward trend with increases of 20.6% and 5.4%, respectively.
However, not all sectors followed this upward trajectory. Grain and oilseed products, particularly those not elsewhere classified, saw a notable 19.7% decline in prices. Softwood lumber prices fell by 11.2%, and unwrought nickel and nickel alloys experienced a 19.1% decrease. These declines highlight the uneven impact of inflation across different sectors, with some industries benefiting from rising global demand, while others face challenges from oversupply and weakening market conditions.
The Raw Materials Price Index (RMPI), which measures the prices of raw materials purchased by manufacturers in Canada, rose by 0.7% in July 2024. This increase was largely driven by a 2.2% rise in crude energy product prices, mirroring trends observed in the IPPI. The rise in crude energy prices can be attributed to ongoing geopolitical tensions in the Middle East and reduced crude oil production from the Organization of the Petroleum Exporting Countries (OPEC) and its partners. The EIA reported that OPEC+ crude oil production in July 2024 was 2.0% lower than in July 2023.
Conversely, the RMPI saw a 1.6% decline in crop product prices for the second consecutive month. The principal contributors to this decline were wheat and grains (except wheat), which fell by 9.3% and 4.0%, respectively. Strong production in the United States and Canada contributed to this trend, as evidenced by the U.S. Department of Agriculture’s grain stocks report, which showed substantial increases in wheat and corn stocks as of June 1, 2024, compared to the previous year.
Additionally, prices for logs, pulpwood, natural rubber, and other forestry products fell by 3.9% month over month in July. Logs and bolts, in particular, experienced a 3.0% decline, marking the third consecutive monthly decrease. This downward trend is closely linked to the ongoing softness in softwood lumber prices, which have affected the broader forestry sector.