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Economy in Brief

FIBER: Industrial Commodity Prices Find A Floor
by Tom Moeller  September 9, 2011

Industrial commodity prices recently have found stability after their downdraft one month ago. At 170.4, the latest price index reading from the Foundation for International Business and Economic Research (FIBER), which covers industrial materials prices, is up slightly but still below where it was in early-August. Through Q2, industrial output growth, which is the prime mover of these prices, weakened considerably. Three-month growth in industrial materials output of 1.6% was its weakest since the recession. But during June & July there was a glimmer of strength as industrial output of materials firmed by 0.7% and 0.8%, respectively.

As such, weakness in each of the FIBER subgroups recently has stabilized. Textiles moved higher on slight upturns in cotton & burlap prices. Regardless, cotton prices remained roughly half the level of early this year. This occurred despite an upturn in textile materials output. Crude oil & benzene prices also rose slightly with the stabilization of crude oil prices near $97.00. They remained down, however, versus the spring, 2011 peak of $113.93. Prices in the miscellaneous group also improved slightly as lumber and rubber prices found a floor. However, the index remained down 8% from its high. Lumber prices continued to weaken as the housing market has yet to materially improve. Prices in the metals group have been erratic. Here, the index first rose in late-August but has since weakened. This came after more-than doubling the recession low. Prices for most metals have shown that volatility though copper scrap rose by four times since the recession low 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, recent improvement in some prices could suggest that recession fears are overblown. However, growing worries about the shape of consumer spending and its impact on output would change that conclusion if they came to pass.

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 170.4 9.5% 158 121 149
  Textiles 83.7 2.9 81 73 74
  Cotton (cents per pound) 107.7 23.8 87.8 52.5 58.0
 Metals 277.1 13.9 240 168 233
  Aluminum ($ per metric ton) 2,354.5 11.1 2,172 1,662 2,571
  Copper Scrap (cents per pound) 406.9 17.7 327 197 280
  Steel Scrap ($ per ton) 419.7 29.9 326 204 350
 Crude Oil & Benzene 196.5 13.4 182 151 200
  Crude Oil ($ per Barrel) 89.3 19.5 79.43 61.71 99.73
 Miscellaneous 188.1 9.5 179 128 159
  Natural Rubber (cents per pound) 254.2 33.3 182 84 124
  Framing Lumber ($ per 1000 board ft.) 258 4.0 283 221 253

FIBER is the Foundation for International Business & Economic Research

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