Canadian Manufactured Product Prices Continue to Decline

OTTAWA - Canadian-manufactured product prices have experienced a third consecutive monthly decline in December. Additionally, Canadian manufacturers have paid less for raw materials due to the drop in crude oil prices.

According to Statistics Canada, the industrial product price index decreased by 1.5% compared to the previous month, and it was 2.7% lower on a year-on-year basis. However, excluding energy and petroleum products, producer prices only slipped 0.6% from November.

The price index is down by 1.8% for the entire year, following significant gains in the previous two years. This marks the second-largest decline in the index's history since 1956. Lower prices for energy and petroleum products are the main driver of this annual fall. Nevertheless, compared to the pre-pandemic year of 2019, prices remained 25.6% higher in 2023.

In December, energy and petroleum prices experienced an 8.5% monthly decline, the largest drop since the end of 2022. This decrease can be attributed to lower prices for diesel fuel and finished motor gasoline, as concerns about future oil demand and a surplus of global petroleum supply mounted.

It's important to note that the industrial product price index only measures the prices manufacturers receive once their goods leave the plant. It does not reflect the final prices consumers pay for goods on store shelves.

Furthermore, prices for raw materials, which reflect the prices manufacturers pay, fell by 4.9% from November. On a year-on-year basis, raw material prices were down by 7.9% last month.

The decline in crude products played a significant role in the monthly decrease, with a fall of 10.3% following a 13% drop in November. Additionally, crop product prices have experienced a fifth consecutive monthly decline, sliding by 3.3% primarily due to lower canola prices.

It is worth mentioning that economic activity in Canada has significantly cooled this year. The central bank expects the economy to remain weak for the next few quarters as it adjusts to higher interest rates following an aggressive campaign that resulted in the benchmark policy rate reaching a 22-year high. The Bank of Canada is set to meet next week to decide on interest rates and provide an update on its economic projections.