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Economy in Brief

FIBER: Commodity Prices Suggest Lackluster Economy
by Tom Moeller  August 1, 2011

On balance, industrial commodity prices have been moving sideways since the spring. At 174.8, the latest price index reading from the Foundation for International Business and Economic Research (FIBER), which covers industrial materials prices, is just slightly below where it was in May. That sideways movement is consistent with the recent weakness in industrial output. Three-month growth in industrial materials output has been zero versus 5% growth in Q1. The weakness does not, however, suggest that prices are low or that output has fallen. The overall level of the FIBER index is up by three-quarters from its recession low. In conjunction, industrial output is up 13% from its nadir.

The weakest of the FIBER subgroups recently has been textiles where the index has been ranging 11% below last March. The figure has been led lower by a halving of cotton prices. That has occurred despite a modest gain in textiles' output. Lower prices in the crude oil & benzene group follow with an 8% decline as crude oil prices have ranged near $97.00 versus the spring, 2011 peak of $113.93. Finally, prices in the miscellaneous group have fallen a similar 8%, led lower by declines in natural rubber which recently have recovered modestly. Also in this group are lumber prices where weakness in the housing market caused a 10% price decline since the spring. Recently, however, there has been a modest price recovery. Bucking the downward trend have been prices in the metals group. Here, the index has stabilized since the spring after more-than doubling the recession low. Prices for copper scrap rose by four times during the period as did steel scrap prices. Lead, zinc and aluminum prices doubled.

Overall, prices for industrial materials should be characterized as a coincident indicator of the economy. As such, the recent sideways movement in industrial output goes a long way in explaining the plateau in industrial prices. Since they're logged every day, industrial prices do give a "real time" indication of economic conditions. Recently, these soft indications stand in contrast to earlier strength. They do not signal, however, that a recession already has been entered.

Commodity price data can be found in Haver's DAILY, WEEKLY, USECON and CMDTY databases.

FIBER Industrial Materials Price Index (1990=100) Latest Latest Y/Y 2010 2009 2008
All Items 174.8 13.3% 158 121 149
  Textiles 83.2 10.1 81 73 74
  Cotton (cents per pound) 131.4 72.1 87.8 52.5 58.0
 Metals 302.5 30.9 240 168 233
  Aluminum ($ per metric ton) 2,508 30.1 2,172 1,662 2,571
  Copper Scrap (cents per pound) 421.9 46.4 327 197 280
  Steel Scrap ($ per ton) 416.7 28.3 326 204 350
 Crude Oil & Benzene 201.7 9.7 182 151 200
  Crude Oil ($ per Barrel) 94.94 31.6 79.43 61.71 99.73
 Miscellaneous 187.9 7.2 179 128 159
  Natural Rubber (cents per pound) 241.2 27.5 182 84 124
  Framing Lumber ($ per 1000 board) 262 6.1 283 221 253

FIBER is the Foundation for International Business & Economic Research

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