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Economy in Brief

FIBER: Industrial Commodity Prices Continue to Falter
by Tom Moeller  August 6, 2018

The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) declined 3.7% last month, as it did during the prior two four-week periods. Prices have been falling since the third week of June. Despite the declines, the index has risen 3.4% y/y.

The recent decline was led by the miscellaneous group where prices fell 7.5% during the last four weeks (-1.8% y/y). Framing lumber prices declined 10.2% last month, but remained up 14.7% y/y. Prices for structural panels were off 13.4% during the last four weeks, but rose 5.5% y/y during the last year. Natural rubber prices fell 3.2% in four weeks and were down 11.1% in the last year. Prices in the metals group declined 4.8% in the last four weeks but remained up a lessened 2.2% y/y. Leading the decline was an 11.0% fall (-7.5% y/y) in lead prices and a 9.0% drop (-5.9% y/y) in the cost of zinc. Copper scrap prices were off 5.9% m/m (-2.1% y/y). Aluminum prices weakened 5.2% m/m, but rose 7.9% y/y. Steel scrap prices, in contrast, increased by 2.5% in the last month (28.6% y/y). Also moving lower were prices in the crude oil & benzene sector by 2.4% m/m, but they were up 16.9% y/y. Crude oil prices fell 7.0% during the last four weeks, but they were up by roughly one-third y/y to an average $68.76 per barrel. Accompanying the recent decline was a 1.4% m/m rise in benzene prices which gained 17.9% y/y. In the textile group, prices overall improved 1.4% last month (5.5% y/y). Cotton prices increased 7.0% over the four weeks (26.4% y/y) while burlap prices rose 2.7% m/m, but were down 2.5% 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.

FIBER Industrial Materials Price Index (%) 1-Mth 3-Mth 6-Mth 12-Mth 2017 2016 2015
All Items -3.7 -4.1 -3.3 3.4 6.7 19.2 -16.3
 Textiles 1.4 0.9 0.8 5.5 3.0 2.8 2.2
  Cotton (cents per pound) 7.0 7.3 13.6 26.4 9.8 10.2 2.6
 Metals -4.8 -8.7 -12.0 2.2 18.6 32.9 -27.8
  Aluminum ($ per metric ton) -5.2 -9.9 -8.4 7.9 26.0 13.0 -19.2
  Copper Scrap (cents per pound) -5.9 -9.2 -12.6 -2.1 29.3 17.3 -27.0
  Steel Scrap ($ per ton) 2.5 -3.3 6.4 28.6 16.8 74.5 -53.8
 Crude Oil & Benzene -2.4 0.3 0.4 16.9 8.1 20.4 -19.4
  Crude Oil (WTI, $ per Barrel) -7.0 1.0 5.2 39.2 10.9 44.3 -35.8
 Miscellaneous -7.5 -6.0 -0.4 -1.8 -0.5 21.7 -18.0
  Framing Lumber ($ per 1000 board ft.) -10.2 -3.0 4.2 14.7 20.0 12.9 -16.4
  Natural Rubber (cents per pound) -3.2 -13.3 -6.7 -11.1 -29.6 89.4 -22.5
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