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Economy in Brief

FIBER: Industrial Commodity Price Index Declines Again
by Tom Moeller  November 12, 2018

The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) declined 3.8% during the last four weeks. The price decline has totaled 13.1% since the peak during the middle of June. During the last ten years, there has been a 66% correlation between the y/y change in industrial commodity prices and the y/y change in factory sector production.

Commodity price weakness was led by an 8.1% m/m decline in prices  (-15.2% y/y) in the miscellaneous group. Prices for structural panels declined 13.6% m/m and 16.1% y/y while framing lumber prices were off 13.4% m/m (-21.8% y/y. Natural rubber prices continued lower by 5.5% in four-weeks and 4.1% y/y. Prices in the crude oil & benzene group faltered 6.3% in four weeks (+1.9% y/y) as the cost of crude oil declined 15.4% (+9.1% y/y) to average $61.56 per barrel. Benzene prices fell 1.5% during the last month and 7.2% y/y.

Lesser price weakness was realized in the metals group where prices eased 0.4% during the last four weeks (-6.8% y/y). Zinc prices fell 3.8% m/m and by nearly one-quarter y/y. Aluminum prices also were weak, posting a 4.8% m/m drop and they fell 7.8% in the last year. Offsetting these declines, steel scrap prices improved 4.9% and have risen by roughly one-third y/y. Copper scrap prices were little changed m/m but fell 9.4% y/y. Lead prices also were fairly stable m/m, but declined by nearly one-quarter y/y. Prices in the textile group eased 0.2% during the last four weeks and also were little changed y/y. Cotton prices increased 2.6% in four weeks and 11.8% y/y. A 5.5% decline (-11.6% y/y) in burlap prices during the last four weeks offset the increase.

Weakness in industrial commodity prices occurred despite improvement in the factory sector. Overall manufacturing sector output rose a fairly steady 0.2% during September (3.5% y/y). The consensus forecast from the National Association for Business Economics (NABE) calls for a 3.8% rise in industrial output during all of 2018 and 2.8% growth in 2019. During the last ten years, there has been a 66% correlation between the y/y change in industrial commodity prices and the y/y change in factory sector 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 -3.8 -6.5 -11.4 -6.5 6.7 19.2 -16.3
 Textiles -0.2 -2.6 -2.2 0.5 3.0 2.8 2.2
  Cotton (cents per pound) 2.6 -11.2 -8.2 11.8 9.8 10.2 2.6
 Metals -0.4 -2.9 -11.3 -6.8 18.6 32.9 -27.8
  Aluminum ($ per metric ton) -4.8 -3.7 -15.8 -7.8 26.0 13.0 -19.2
  Copper Scrap (cents per pound) 0.1 1.1 -8.4 -9.4 29.3 17.3 -27.0
  Steel Scrap ($ per ton) 4.9 -0.5 -3.8 31.5 16.8 74.5 -53.8
 Crude Oil & Benzene -6.3 -4.2 -5.3 1.9 8.1 20.4 -19.4
  Crude Oil (WTI, $ per Barrel) -15.4 -8.9 -12.2 9.1 10.9 44.3 -35.8
 Miscellaneous -8.1 -13.2 -20.8 -15.2 -0.5 21.7 -18.0
  Framing Lumber ($ per 1000 board ft.) -13.4 -27.2 -35.8 -21.8 20.0 12.9 -16.4
  Natural Rubber (cents per pound) -5.5 -0.8 -14.7 -4.1 -29.6 89.4 -22.5
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