The New Bank of Canada Commodity Price Index (BCPI)

The Bank of Canada today announced the introduction of a new Bank of Canada commodity price index (BCPI). 1 In order to produce a more accurate, representative and flexible index, the methodology used to construct the index has been changed. Instead of using a fixed-weight price index in which the weights are updated only infrequently, the new BCPI uses a chain Fisher price index with weights updated on an annual basis. The new Fisher BCPI includes a broader set of commodities and is updated using recent commodity production data.

Please note that the new Fisher BCPI replaces the previous fixed-weight series. It is a weighted index of U.S.-dollar prices of commodities produced in Canada and sold in world markets.

Since the prices of commodities produced in Canada have important implications for the performance of the Canadian economy, the interpretation of developments in commodity markets is critical for the conduct of monetary policy, and an accurate measure of overall movements in prices is essential.

A key advantage of the new Fisher BCPI is the annual updating of the weights (based on annual production values), so that the new index produces a more accurate and more relevant measure of commodity price movements. In addition, its consistency with the Canadian System of National Accounts (which is also based on chain Fisher indexes) makes the construction of a volume measure for Canadian commodity production possible.

Further Information:

• Bank of Canada Discussion Paper No. 2010-6: The Fisher BCPI: The Bank of Canada’s New Commodity Price Index, Ilan Kolet (Bank of Canada) and Ryan Macdonald (Statistics Canada).
• Bank of Canada commodity price index.