· Is a Recession Imminent? from the Federal Reserve Bank of San Francisco is available here.
| Industrial Production (Y/Y %) | 2005 | 2006 (YTD) |
| OECD Major 7 Countries | 1.9% | 3.6% |
| United States | 3.2% | 5.2% |
| Germany | 3.4% | 6.4% |
| Japan | 1.6% | 5.0% |
| China | -0.3% | 1.3% |
·
Add
to the mix the growth in China and the demand for raw materials has been
firm, though the falloff in
petroleum prices recently has dominated the headlines. Since 1980,
there has been a 60% correlation between the y/y change in prices for
industrial materials prices and the change in OECD Big 7 factory
production.
· Even with oil, the JoC-ECRI index of industrial commodity prices has registered a volatile sideways drift during since mid-year. That's an impressive performance given the nearly one quarter decline in the price of petroleum products.
· Higher industrial metal prices
reflect the world's resilient factory sector (see table above). The
JoC-ECRI Industrial Metals Prices Index is up by more than one third
from last year on the strength of a 70% y/y advance in copper scrap
prices which are roughly double what they were in 2005 and firmness in
zinc prices which have roughly tripled since 2005. Additional strength
stems from spot aluminum ingot prices (27% y/y) though prices for
stainless steel scrap have been flat to down (-15 y/y) with the weakness
in auto production which is off by roughly one quarter since early 2002.
· Textile prices certainly are lower
than the peak levels of earlier this year. Much of that decline reflects
a recent weakness in cotton prices (-6% y/y) though both the JoC index
of textile prices and cotton prices in particular have shown recent gain.
· Natural gas prices have ranged widely since last winter's spike. A recent lift has taken gas up sharply from the recent low (-33.2% y/y) early this past October. While weather forecasts account for the bulk of the short term movement in gas prices, industrial demand is estimated to account for 37.6% of natural gas demand which is the highest of any sector. A report from the Natural Gas Supply Association is available here.
· Gold
prices as well have shown some lift to $645 per ounce, a rise of roughly
one quarter since last year. The Unreliability of Inflation
Indicators is a 2000 article from the Federal Reserve Bank of New
York and it can be found here.
· Inflation, Inflation Expectations, and Monetary Policy, a speech by Sandra Pianalto, President & CEO of the Federal Reserve Bank of Cleveland can be found here.