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Economy in Brief

FIBER: Industrial Commodity Prices Remain Under Pressure
by Tom Moeller  September 14, 2015

Only moderate improvement in U.S. economic activity combined with weakness in the rest of the world provided little support to crude materials prices last month. The industrial commodity price index from the Foundation for International Business and Economic Research (FIBER) deteriorated by 1.0% during the last four weeks, leaving prices off 6.5% during the past year. In the U.S. alone, a 0.8% rise in factory sector production during July left output so far this year up a modest 0.5% and just 1.4% during the last twelve months. Growth abroad similarly remained weak.

Within the sector groupings of prices, the FIBER measures show broad-based weakness. In the crude oil & benzene area, WTI crude oil continued its downward trend nearing $45.00, off by one-half y/y. Prices for the petro-chemical benzene also remained under pressure, off by one quarter during the last month and off more than one-half y/y. In the metals sector, prices were mixed. Steel scrap prices fell 9.0% during the last four weeks and by 40.9% during the last year. Aluminum prices, however, firmed 2.1% m/m (-21.5% y/y) and copper scrap prices also bounced 3.5% off the six-year low (-23.5% y/y). Lead prices similarly stabilized m/m but fell 18.9% y/y. In the miscellaneous price grouping, framing lumber prices remain under pressure but the degree of weakness (-27.0% y/y) seems little-affected by firmer U.S. home building activity. Prices for structural panels, however, have risen 5.9% during the last four weeks (-10.6% y/y). Natural rubber prices continue to soften (-11.3% y/y). Prices in the textile sector have shown comparative strength, easing just 0.5% during the last year. Cotton prices have declined 10.0% y/y, while burlap prices have risen 11.3% y/y.

Support for commodity prices may be on the way. The current industrial output projection from the National Association for Business Economics calls for 2.3% U.S. production growth in 2015 followed by a 3.0% rise next year. This year's projected increase is diminished, however from earlier expectations. During the last ten years, there has been a 52% correlation between the three-month change in prices and the change in industrial output.

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

FIBER Industrial Materials Price Index (1990=100) 09/11/15 1-Mth % 3-Mth % 6-Mth % Y/Y % 2014 2013
All Items 134.0 -1.0 -7.5 -6.5 -18.6 163.5 169.0
 Textiles 75.2 -0.3 -0.5 0.8 -0.5 76.8 78.2
  Cotton (cents per pound) 63.90 -0.1 -3.2 1.6 -10.0 73.6 79.6
 Metals 181.3 -0.5 -8.6 -8.6 -25.7 237.8 236.2
  Aluminum ($ per metric ton) 1,521.0 3.6 -6.1 -8.8 -21.5 1,864.9 1,846.7
  Copper Scrap (cents per pound) 210.67 3.3 -10.9 -8.7 -23.5 311.7 332.3
  Steel Scrap ($ per ton) 247.27 -9.0 -9.1 -7.1 -40.9 358.3 345.8
 Crude Oil & Benzene 133.8 -6.3 -13.6 -6.1 -34.9 205.2 207.7
  Crude Oil (WTI, $ per Barrel) 45.20 4.1 -24.7 -7.4 -51.2 93.5 97.9
 Miscellaneous 167.5 0.6 -9.0 -10.4 -16.7 199.6 218.3
  Framing Lumber ($ per 1000 board ft.) 326 -9.4 -7.5 -12.6 -27.0 383 383
  Natural Rubber (cents per pound) 108.65 -9.7 -24.9 -19.0 -11.3 140.2 190.0
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