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Economy in Brief

FIBER: Industrial Commodity Prices Strengthen
by Tom Moeller  June 11, 2018

The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) improved 1.3% during the last four weeks and 12.9% during the last year. Industrial materials prices overall have risen by roughly one-third versus the early-2016 low. A 1.9% y/y increase in industrial sector output prompted the gain as it followed 1.7% growth during 2017. Price increases have been broad-based.

Prices in  the miscellaneous group exhibited the most strength with a 3.0% gain during the last four weeks and a 13.4% rise during the past year. Framing lumber prices strengthened 10.9% last month, up by nearly one half y/y. Prices for structural panels improved 6.2% during the last four weeks and rose 42.8% during the last year. Lower prices for natural rubber offset some of this strength with a 3.6% decline last month and remained down 2.7% y/y. In the metals sector, prices firmed 1.7% during the last month and improved 21.1% y/y. The gain was led by an 8.6% rise (20.1% y/y) in the cost of lead as well as a 4.2% increase (27.7% y/y) in zinc prices. Copper scrap costs strengthened 3.6% m/m and 25.8% y/y. Offsetting these gains was a 3.7% one-month fall (+27.6% y/y) in steel scrap prices as well as a 0.6% four-week easing (+21.3% y/y) in aluminum prices. In the textile group, prices overall improved 0.9% (2.5% y/y).

Cotton prices surged 7.2% over the last month (18.8% y/y), but burlap prices fell 1.5% m/m and were down 2.5% during the past year. In the crude oil & benzene sector, prices declined 2.3% last month, but rose 15.0% y/y. Crude oil prices declined 7.3% m/m to an average $65.34 per barrel, but were up by more than one-third y/y. Benzene prices rose by 2.6% in the last four weeks (13.5% y/y).  

Further strength in prices overall may be coming. The consensus forecast for industrial output from the National Association for Business Economics (NABE) calls for a 3.8% rise in 2018 and 2.8% growth in 2019. During the last ten years, there has been 50% correlation between the three-month change in prices and the change in U.S. industrial output. In addition, factory sector production in the European Union and Japan continues to improve.

Commodity price data can be found in Haver's DAILY, WEEKLY, USECON and CMDTY databases. The NABE forecast is in the SURVEYS database.

FIBER Industrial Materials Price Index (%) 1-Mth 3-Mth 6-Mth 12-Mth 2017 2016 2015
All Items 1.3 1.7 8.2 12.9 6.7 19.2 -16.3
 Textiles 0.9 0.5 2.6 2.5 3.0 2.8 2.2
  Cotton (cents per pound) 7.2 8.6 23.0 18.8 9.8 10.2 2.6
 Metals 1.7 2.0 8.6 21.1 18.6 32.9 -27.8
  Aluminum ($ per metric ton) -0.6 8.9 13.6 21.3 26.0 13.0 -19.2
  Copper Scrap (cents per pound) 3.6 2.1 5.6 25.8 29.3 17.3 -27.0
  Steel Scrap ($ per ton) -3.7 6.9 31.7 27.6 16.8 74.5 -53.8
 Crude Oil & Benzene -2.3 1.8 2.8 15.0 8.1 20.4 -19.4
  Crude Oil (WTI, $ per Barrel) -7.3 6.6 14.5 39.3 10.9 44.3 -35.8
 Miscellaneous 3.0 2.3 15.2 13.4 -0.5 21.7 -18.0
  Framing Lumber ($ per 1000 board ft.) 10.9 13.7 33.5 44.8 20.0 12.9 -16.4
  Natural Rubber (cents per pound) -3.6 -0.2 9.3 -2.7 -29.6 89.4 -22.5
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