As a small business owner, you know that cash flow is king. Learn about the Industrial Product Price Index in Canada and discover how you can use it to help prevent cash flow shortages caused by unexpected cost increases.
What Is the IPPI?
The Industrial Product Price Index measures fluctuations in the prices of major goods sold by Canadian manufacturers. The IPPI is based on actual prices received by the manufacturers as their products leave the factory gate rather than on the final amount paid by buyers. It excludes sales taxes and tariffs imposed on the goods as well as transportation costs.
Method of Data Collection
Every month, Statistics Canada collects data used to calculate the IPPI. They get the data by sending sample questionnaires to manufacturers throughout Canada. The largest producers in a given industry are always included in the sampling; smaller producers are selected randomly for participation.
Calculating the Product Price Index
The IPPI compares the current price of a product versus prices for the same product in a specific reference time period. Prices in the reference time period are expressed as 100. For example, the overall product price index for November 2018 was 118.1 in comparison to prices for the same products in 2010.
Why the IPPI Matters to Your Small Business
Keeping a close eye on Canada’s Industrial Product Price Index can help you forecast price trends on the goods you use or sell in your business so you aren’t surprised by escalating costs. It provides useful data that can help you set accurate annual budgets for your small business. It can also help you price your own goods and draft contract bids to reflect changing market conditions appropriately.