2016-12-21 00:00:00 Finance and Accounting English Read the definition of the raw materials price index. Review how analysts and small business owners can use this index to make hypotheses. https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/03/contractors-review-raw-wood-prices.jpg Small Business Terms: What Is the Raw Materials Price Index (RMPI)?

Small Business Terms: What Is the Raw Materials Price Index (RMPI)?

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The Raw Materials Price Index (RMPI) is an index used to explain the relative change in the price of raw materials purchased by Canadian manufacturers. Essentially, the RMPI looks at the prices of a basket of manufacturing expenses that includes raw materials, transportation costs, taxes, and duties. Then, it compares the price of these goods from the previous year to create a ratio or index.

Analysts use this index as an early warning indicator for inflation. Rising prices in manufacturing costs eventually correspond to rising consumer prices. As a business owner involved in manufacturing, you can use the index to assess when commodities prices are on the rise, determine when you need to increase your manufacturing budget, and track relative changes in your business expenses compared to national shifts in the prices of raw materials.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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