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Trends and Commodities: A Look at Growth and Inflation
Economic and Industrial Growth in Developed Countries
Canada lags the US and Japan in industrial and economic growth. Over the past year, industrial production has risen 2.8% while overall economic activity rose by 1.6%, in contrast to industrial growth of 6.3% and economic growth of 4.8% in the US.
Consumer Price Inflation in Developed Countries
With consumer prices running about 2.5% higher than a year ago, Canada’s inflation rate remains within the 1% to 3% target range set by the Bank of Canada. Inflation is expected to rise slightly in Canada over the coming year, with prices increasing more rapidly in Europe although not as quickly as inflation rates forecast for the US or Japan.
Manufacturers' Selling Prices & Industrial Wage Rates
Manufacturers in Canada and the US have been able to push selling prices up the most over the past year. In Canada, selling prices have risen by 5.5%, much more rapidly than hourly wage rates. In most developed economies outside of North America, increases in industrial wage rates continue to outstrip manufacturers’ selling prices.
Economic & Industrial Growth in Asian Economies
Industrial and economic growth remains strong in all major Asian economies, with the exception of the Philippines. Industrial production has grown by 17.5% over the past year in China, but similar growth rates have been recorded in Indonesia, Singapore and Taiwan.
Economic & Industrial Growth in Other Developing Economies
Industrial and economic growth rates are also rebounding in Latin American, Eastern European and other developing economies—although not as strongly as in Asia.
Rates of Currency Appreciation Against the US Dollar
The Canadian dollar has appreciated by 4.5% against its US counterpart since July 2003. However, other major currencies have increased much more rapidly against the US dollar over the past year.
Commodities: Energy Down, Metals Up
RBC’s commodity price index was virtually unchanged in July, averaging 159.84, a 0.1% decline from a month earlier. On a year-over-year basis, the index is still up over 25%. Of the four sub-indexes, gains and losses were split. Energy and agricultural products fell 1.9% and 6%, respectively, while metals and forestry products both had gains of 3.9% each. RBC’s commodity price index and sub-indexes are denominated in U.S. dollars and weighted by major Canadian commodity exports.
Although energy products prices fell marginally in July, it was not due to oil prices, which have continued to soar to record-high levels. Oil prices averaged US$40.91 per barrel during the month, up 7.5% and 33.2% on a year-over-year basis. These higher prices can be attributed to rising demand on a global scale as well as potential supply disruptions and the continued uncertainty in the Middle East. Natural gas prices fell 5.8% in July to average US$5.93 per million British thermal units.
The agricultural products sub-index fell in July mostly due to lower barley, canola and wheat prices. Although all of the commodities within the sub-index declined, barley, canola and wheat had the biggest drop, falling 13.5%, 9.8% and 7.1%, respectively.
In the metals sub-index, nickel prices led the way again, up another 10.4% in July. On a year-over-year basis, nickel prices have risen 69.5% as tighter inventories and lower levels of supply have brought about higher prices. Silver rose 8.8% to average US$6.36 per ounce. Lead prices were also higher in the month, rising 8.2% and up a staggering 81.4% on a year-over-year basis.
Forestry products was the only other sub-index to shell out gains for the month, led by lumber and pulp prices. Continued positive economic releases in the U.S. housing industry can be attributed to another 6.0% increase in lumber prices. Pulp prices rose 1.6% and are up 18.4% on a year-over-year basis.
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