Amid Declining Softwood Lumber Prices, Canada’s Industrial Product Price Index & Raw Materials Price Index Are Trending Lower

Statistics Canada (StatsCan) reported on Wednesday (7-20-22) that the price of products manufactured in Canada as a measured by the Industrial Product Price Index (IPPI) declined by 1.1% month-over-month in June. This was the first monthly decline in the IPPI since August 2021, when it declined 0.3%. However, year-over-year the IPPI was 14.3% higher than in June 2021.

Price of raw materials purchased by manufacturers operating in Canada as measured by the Raw Materials Price Index (RMPI) inched 0.1% lower on a monthly basis in June, but year-over-year they were 32.4% higher.

The decline in the IPPI was mostly driven by a 28.0% drop in softwood lumber prices. This was the third consecutive monthly decrease for softwood lumber and the largest monthly decline since July 2021, when they dropped 32.9%. Year-over-year, softwood lumber prices were down 37.2%, the largest decline on record since the series began in 1956. Even with the substantial drop, prices in June were nonetheless 80.3% higher than those in January 2020 prior to the onset of the COVID-19 pandemic.

Lower lumber prices were partially attributable to slowing demand for construction. The June price drop followed a 14.4% decline in monthly US housing starts in May, the largest monthly decrease since April 2020. The US residential construction market is the primary customer for Canadian softwood lumber. Rising interest rates and high costs for construction materials also played a role in driving prices and housing starts down.