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Trends ; COMMODITIES
Almost 2.3 million Canadians—15% of total employment—are working in manufacturing. In March, Canadian employment totaled 15,901,000, up by 206,800 on a year-over-year basis. Manufacturing employment fell by 21,000 between March 2003 and March 2004. During that time, there were also significant job losses in the personal services sector over that period of time. Health care and trade accounted for the strongest growth in new jobs.
The Canadian economy grew by 1.6% between January 2003 and January 2004. After discounting for price changes, the strongest growth rates were in construction and primary industries. Manufacturing contracted by 0.7 per cent.
Canada’s annual rate of consumer price inflation fell to 0.7% in February—its lowest level since December 2001. Coupled with weaker than expected economic and employment growth, the low inflation rate indicates the Bank of Canada is likely to cut short-term interest rates even further later this spring.
Manufacturers’ selling prices declined an average of 2.4% between the beginning of January 2001 and January 2004. The average price of intermediate goods fell by 2.3% over that period, while the average price of finished goods was down by 2.6 per cent.
Manufacturers’ selling prices have risen an average 5% since the beginning of 1997. Most costs of doing business have outpaced price increases. Hourly wage rates have risen 22% while the cost of raw materials has increased by 16 per cent. The most rapid increases have been in industrial energy costs, which have risen by almost 60% over the past seven years.
Commodities: Metals Volatile
In April, the RBC commodity price index grew to 153.60, up almost 4% for the month. On a year-over-year basis, the overall index has climbed 23.4%. The only decline in the four sub-indexes was in metals prices, which fell 0.8%. Agricultural products and energy prices increased 2% and 4%, respectively. The largest gains came in the forestry products sub-index, which rose 7.2% and is up nearly 43% on a year-over-year basis. RBC’s commodity price index and sub-indexes are denominated in U.S. dollars and weighted by major Canadian commodity exports. The indexes have been updated this month to include 2003 export values and are indexed to January 2000 prices.
In the extremely volatile metals sub-index, lead prices fell 14.9% in April, while aluminum prices rose 4.5%. All of the metals in the subindex have had dramatic gains on a year-over-year basis and the recent pullback in March and April comes as no surprise. Metals such as lead and nickel have risen 70.1% and 60.5% on a year-over-year basis, while gold and silver prices are up 22.9% and 57.5%, respectively.
Agricultural products got a strong lift from wheat and barley prices in April, which rose 2.2% and 8.6%, respectively. Unpredictable weather conditions and concerns about crop damage heading into the May grain harvest season explain much of the recent price increases.
In the energy products sub-index, natural gas prices rose 6% to average US$5.71 per million British thermal units in April. Oil prices were virtually unchanged, sliding 0.2% to average US$30.14 per barrel of WTI. Continuing improvement in GDP and industrial production will lead to higher energy consumption in the coming months. Taken together with tighter supplies and warmer weather, prices should continue their upward trend in the short-term.
Much of April’s 7.2% gain in the forestry products sub-index came from rising lumber prices. Continued strength in housing construction has kept demand for lumber very high. Lumber prices averaged US$407.10 in April, levels not seen since January 1997.
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