The following is the text of the industrial product and raw material prices report as reported by Statistics Canada.

Between July and August, the Industrial Product Price Index (IPPI) increased 0.5%, led by motor vehicles and chemical products. The Raw Materials Price Index (RMPI) fell 3.2%, largely as a result of lower prices for mineral fuels.

Prices for industrial goods rise

The increase of the IPPI in August was the first in three months, and was primarily the result of higher prices for motor vehicles and other transport equipment (+1.7%) and chemicals and chemical products (+0.7%). Pulp and paper products (+0.9%) and electrical and communication products (+0.9%) also contributed to the advance.

Contributing to the increase in the price of motor vehicles and other transport equipment were higher prices for automobiles, trucks and buses (+2.5%) and motor vehicle parts (+0.9%). The 2.8% decline in the value of the Canadian dollar against the US dollar in August contributed significantly to the rise in motor vehicle prices.

Some Canadian producers who export their products are paid on the basis of prices set in US dollars. Consequently, the decline of the Canadian dollar in relation to the US dollar had the effect of increasing the corresponding prices in Canadian dollars. Without the impact of the exchange rate, the IPPI would have fallen 0.2% instead of rising 0.5%.

The rise in the IPPI in August was moderated by a 1.1% decline in petroleum and coal product prices.

Excluding petroleum and coal products, the IPPI would have risen 0.7% in August, following a 0.5% decline in July.

12-month change in the IPPI: August advance similar to increases observed since March

The IPPI was up 5.2% in August compared with the same month a year earlier, which was similar to the rate of change observed in the previous five months. Of the 21 major commodity aggregations, 16 advanced and 5 declined.

Compared with August 2010, the increase in the IPPI was mainly a result of higher prices for petroleum and coal products (+29.8%) and primary metal products (+10.7%). Chemicals and chemical products (+8.7%) also contributed to the advance.

Year over year, prices for petroleum and coal products continued the upward trend that began in November 2009. The increase in August was smaller than July, but similar to advances reported since April 2011.

The largest contributors to the year-over-year price increase of primary metal products were precious metals, in particular silver and platinum (+92.5%), precious metal basic manufactured shapes (+72.5%) and copper products (+15.5%).

Chemicals and chemical products (+8.7%) and fruit, vegetables, feeds and other food products (+7.2%) made smaller contributions to the year-over-year IPPI increase in August.

In August, the 6.0% year-over-year gain in the value of the Canadian dollar relative to the US dollar slowed the advance of the IPPI. Without the impact of the exchange rate, the IPPI would have risen 6.6% instead of 5.2%.

The year-over-year increase in the IPPI in August was moderated by lower prices for motor vehicles and other transport equipment (-2.8%), pulp and paper products (-2.2%) and lumber and other wood products (-1.7%).

Excluding petroleum and coal prices, the year-over-year IPPI would have increased 2.4% in August instead of 5.2%. This continues the upward trend that began in May 2010.

RMPI: Fourth consecutive monthly decrease

The RMPI declined by 3.2% in August compared with the previous month. This was larger than declines in June and July, but was smaller than the decrease reported in May.

Prices for raw materials continue to decrease

The decline of the RMPI resulted mainly from mineral fuels, which were down 7.0%. Crude oil prices fell 7.5% in August, marking the fourth consecutive monthly decrease. Uncertainty over global growth affected prices until mid August, when some stabilization was observed.

Contributing to the decline in the RMPI in August were lower prices for non-ferrous metals (-2.3%), largely influenced by copper and nickel concentrates (-5.6%) and non-ferrous metal scrap (-3.6%). Grains (-1.6%) continued its decline from July.

Prices for animal and animal products (+3.4%), ferrous materials (+2.1%), coffee, tea and cocoa (+2.3%) as well as rubber and allied gums (+1.8%) moderated the decrease in the RMPI.

Excluding mineral fuels, the RMPI would have increased 0.3% in August.

Compared with the same month a year earlier, the RMPI was up 13.3% in August, the smallest year-over-year increase since February 2011. The main contributors to the advance were higher prices for mineral fuels (+12.2%), non- ferrous metals (+16.7%), vegetable products (+31.5%) as well as animal and animal products (+11.7%).

Year over year, excluding mineral fuels, the RMPI would have risen 14.3% in August compared with 17.3% in July.

Note to readers

All data in this release are seasonally unadjusted and usually subject to revision for a period of six months (for example, when the July index is released, the index for the previous January becomes final).

The Industrial Product Price Index (IPPI) reflects the prices that producers in Canada receive as the goods leave the plant gate. It does not reflect what the consumer pays. Unlike the Consumer Price Index, 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 transportation, wholesale and retail costs.

Canadian producers export many goods. They often indicate their prices in foreign currencies, especially in US dollars, which are then converted into Canadian dollars. In particular, this is the case for motor vehicles, pulp, paper and wood products. Therefore, a rise or fall in the value of the Canadian dollar against its US counterpart affects the IPPI. But the conversion into Canadian dollars only reflects how respondents provide their prices. Moreover, this is not a measure that takes into account the full effect of exchange rates, since that is a more difficult analytical task.

The conversion of prices received in US dollars is based on the average monthly exchange rate (noon spot rate) established by the Bank of Canada, and it is available on CANSIM in table 176-0064 (series v37426). Monthly and annual variations in the exchange rate, as described in the text, are calculated according to the indirect quotation of the exchange rate (for example, CAN$1 = US$X).

The Raw Materials Price Index (RMPI) reflects the prices paid by Canadian manufacturers for key raw materials. Many of those prices are set on the world market. However, as few prices are denominated in foreign currencies, their conversion into Canadian dollars has only a minor effect on the calculation of the RMPI.