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Economy in Brief

FIBER: Industrial Commodity Prices Post Further Weakness
by Tom Moeller  July 20, 2018

The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) declined 3.7% last month. It has fallen for five straight weeks. Despite the declines, the index has risen by 6.5% y/y.

The recent decline was led by an 8.4% m/m drop in metals prices, which remained up 3.8% y/y. Leading the decline was a 16.9% fall (-7.6% y/y) in zinc prices. Copper scrap prices were off 11.7% m/m (+3.1% y/y) and lead prices fell 10.9% in four weeks (-5.8% y/y). Aluminum prices weakened 5.0% m/m, but rose 9.9% y/y. To the supside, steel scrap prices improved 0.9% in the last month (29.0% y/y). Prices in the miscellaneous group fell 5.2% during the last four weeks (+5.2% y/y). Framing lumber prices declined 6.8% last month, up 29.4% y/y. Prices for structural panels were off 9.2% during the last four weeks, but rose 20.1% y/y during the last year. Natural rubber prices fell 2.9% in four weeks and were down 8.7% in the last year. Offsetting the declines last month was a 1.3% price rise (18.8% y/y) in the crude oil & benzene sector. Crude oil prices rose 5.1% during the last four weeks, but in the last two fell 6.7%, to an average $68.95 per barrel. Prices remained up by roughly one-half y/y. Offsetting that rise were benzene prices which fell 2.9% (+13.4% y/y) in the last four weeks. In the textile group, prices overall improved 0.4% last month (3.9% y/y). Cotton prices increased 2.2% over the last month (29.1% y/y) while burlap prices rose 0.9% m/m, but were down 2.1% during the past year.

Renewed 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 during all of 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.

Assessing the Risk of Yield Curve Inversion: An Update from James Bullard, President & CEO, Federal Reserve Bank of St. Louis is available here.

FIBER Industrial Materials Price Index (%) 1-Mth 3-Mth 6-Mth 12-Mth 2017 2016 2015
All Items -3.7 -3.1 -0.6 6.5 6.7 19.2 -16.3
 Textiles 0.4 0.7 -0.1 3.9 3.0 2.8 2.2
  Cotton (cents per pound) 2.2 7.5 7.7 29.1 9.8 10.2 2.6
 Metals -8.4 -10.8 -10.1 3.8 18.6 32.9 -27.8
  Aluminum ($ per metric ton) -5.0 -14.4 -5.3 9.9 26.0 13.0 -19.2
  Copper Scrap (cents per pound) -11.7 -11.1 -13.8 3.1 29.3 17.3 -27.0
  Steel Scrap ($ per ton) 0.9 -3.3 8.6 29.0 16.8 74.5 -53.8
 Crude Oil & Benzene 1.3 -0.0 1.0 18.8 8.1 20.4 -19.4
  Crude Oil (WTI, $ per Barrel) 5.1 2.0 7.9 48.4 10.9 44.3 -35.8
 Miscellaneous -5.2 -0.5 7.3 5.2 -0.5 21.7 -18.0
  Framing Lumber ($ per 1000 board ft.) -6.8 7.7 19.6 29.4 20.0 12.9 -16.4
  Natural Rubber (cents per pound) -2.9 -7.6 -5.8 -8.7 -29.6 89.4 -22.5
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