Tuesday, January 31, 2012

Industrial Producer Price Index -- down again

The IPPI decreased in December after posting a 0.3% increase in November. It was the IPPI's largest decline since the 0.9% decrease in June 2010. The downturn in the index was largely a result of lower prices for petroleum and coal products (-3.7%) and primary metal products (-2.4%). Chemical products also contributed, though to a much lesser extent, with a 0.7% decline( StatsCan).

So the massive IPPI increase of earlier this year has tempered, on a YoY basis, IPPI is up 2.8%, not great but better than the 5.5% in May.  Again, fuel costs are at the center of the reduction, but they are joined by raw material prices (as metal prices have dropped).  Overall, its a win for Carney, that had resisted raising interest rate (because of global economic concernes) to meet inflation expectations, because he believed these pressures to be transitory.  Like the the Bank of England, the BoC was right on that call.


Looking at the data in greater depth, what is remarkable is how little price movement have occurred over  the last four years.  In 2008, the IPPI index was at 107 (2002 was re-based at 100), as of December 2012 the index is at 114, which gives an annual increase of 1.6% compounded.  Which is not a lot, and excluding petroleum products (not a brilliant idea) shows that the IPPI has been stagnant for nearly 4 years. 


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