Industrial product and raw materials price indexes, March 2020

Released: 2020-04-30

Prices for products manufactured in Canada, as measured by the Industrial Product Price Index (IPPI), decreased 0.9% in March, driven primarily by lower prices for refined petroleum energy products. Prices of raw materials purchased by manufacturers operating in Canada, as measured by the Raw Materials Price Index (RMPI), decreased 15.6%, mostly due to lower prices for crude oil.

Chart 1 
Prices for industrial products decrease

Industrial Product Price Index

In March, the IPPI decreased 0.9% month over month. This was the third consecutive monthly decline and the largest decrease since June 2019 (-1.4%). Out of the 21 major commodity groups, 3 were down and 18 were up. From February to March, the Canadian dollar depreciated 5.0% relative to the US dollar. If the exchange rate had remained constant, the IPPI would have decreased 2.1%.

This decline was primarily due to lower prices for energy and petroleum products (-14.6%), the largest drop in this category since December 2008 (-19.6%). Prices fell for refined petroleum energy products (-17.6%), such as motor gasoline (-20.7%), diesel (-17.1%) and light fuel oils (-16.8%). This is the largest decrease on record for the IPPI's refined petroleum energy products, and biofuels subcategory, which was first published in January 2010. The decline in these energy products is primarily due to the large drop in prices for crude oil, which was impacted by a triad of influences: excess global supply, a price war between the Organization of the Petroleum Exporting Countries (OPEC) and Russia, and decreased global demand due to COVID-19.

Excluding energy and petroleum products, the IPPI was up 1.0%. Prices for motorized and recreational vehicles increased by 2.0%. Pulp and paper products were up by 3.2%. Many of the product prices surveyed for these categories are denominated in US dollars; the depreciation of the Canadian dollar against the US greenback therefore had an upward influence on these prices. Despite the increases in both the aforementioned categories, some manufacturers reported shutdowns and lower volumes in March, attributable to COVID-19's impact on their activities.

On a year-over-year basis, the IPPI was down 2.4%, primarily due to a 22.4% decrease in prices for energy and petroleum products.

Raw Materials Price Index

In March, the RMPI was down by 15.6%, the third consecutive monthly decline and the largest decrease since December 2008 (-15.7%). Of the RMPI's six major commodity groups, two were down and four were up.

The decrease in March was primarily due to a major fall in prices for crude energy products (-38.1%). This was the largest decrease in this category since its introduction to the RMPI in January 1981.

The primary driver for the decrease in crude energy products was the price of conventional crude oil (-39.7%), which recorded its largest decrease on record since the series began in 1981. A multitude of factors coalesced in March to place downward pressure on the price of crude. OPEC and Russia were unable to reach an agreement to curb production of crude oil. The coalition led by OPEC and Russia, known as OPEC+, had been cutting their production since January 2017. Consistent production from OPEC, Russia and the United States coincided with a decrease in global demand due to COVID-19. This resulted in the global petroleum supply being greater than global demand. According to the Energy Information Administration, the world supply of petroleum was 99.02 million barrels per day (MMb/d) in March, while consumption was 89.38 MMb/d. The latter represents a 6.6% decrease in consumption from February to March.

Excluding crude energy products, the RMPI was up by 0.4%. The metal ores, concentrates and scrap category was up 0.8%. Within this category, precious metals were up 7.3%, mainly due to a 10.0% increase in prices for gold ores, concentrates, and bullion. The market for gold in March was volatile. In the first half of the month, prices fell sharply, corresponding to declines in equity markets worldwide. The volatility was in part attributable to investors selling gold to mitigate losses incurred elsewhere. In the latter half of the month, gold prices surged. Investors seeking a safe haven were among the factors that drove the price up. Global liquidity of gold was also impacted by COVID-19 as refineries were shut down and supply routes were disrupted. Also within the metals category, prices for copper ores and concentrates fell by 4.9%. This decline is partly attributable to negative sentiments regarding the current macroeconomic situation as copper is used in construction, electronics and transportation equipment, all of which were impacted by COVID-19.

Year-over-year, the RMPI was down 22.7%, mostly due to a 48.7% decrease in prices for crude energy products.

Chart 2 
Prices for raw materials decline

Contact information

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