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Economy in Brief

FIBER: Industrial Commodity Prices Post Broad-Based Declines
by Tom Moeller  August 12, 2019

The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) declined 3.1% during the last four weeks. The price index was down 13.0% y/y and has fallen to the lowest level since June 2016. Prices declined broadly amongst product categories.

Leading last month's weakness were prices in the crude oil & benzene category as they weakened 5.2%. Crude oil prices declined to $53.99 per barrel and were below the $75.05 early-October peak. Prices for the petro-chemical benzene fell 10.1% during the last month (-20.2% y/y). Also weak were prices in the miscellaneous group which declined 3.8% during the last four weeks. Natural rubber prices fell 18.0% but they still were 3.2% higher y/y. The cost of framing lumber weakened 3.6% during the last four weeks. Prices for structural panels fell 2.6% m/m and remained down by one-quarter y/y. Adding to the decline in industrial commodity prices was the cost of metals which was off 2.3% over the last month, reflecting a 3.0% decline in aluminum prices. Copper scrap prices also fell 3.0% last month (-7.2% y/y) and the price of steel scrap price weakened 2.8% (-14.8% y/y). Zinc prices fell 3.6% in the last four weeks (-12.8% y/y), but lead prices increased 4.4% (-5.9% y/y). Also moving 1.8% lower during the last four weeks were prices in the textile group as cotton prices fell 8.5%. They were off roughly one-third y/y. Burlap prices also declined 3.6% m/m and 8.8% y/y.

Declines in commodity prices clearly reflect weakness in economies outside the United States. Growth in the U.S. also is slowing. After 4.0% growth last year in industrial output, the consensus forecast from the National Association for Business Economics (NABE) calls for a 2.4% rise in industrial production during all of 2019, and a 1.8% gain next year. During the last ten years, there has been a 52% correlation between the y/y change in industrial commodity prices and the y/y change in factory sector output.

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 2018 2017 2016
All Items -3.1 -5.2 -5.2 -13.0 -12.0 6.7 19.2
 Textiles -1.8 -4.2 -4.5 -7.9 -2.8 3.0 2.8
  Cotton (cents per pound) -8.5 -20.9 -22.1 -36.5 -9.2 9.8 10.2
 Metals -2.3 -5.9 -10.7 -11.3 -12.2 18.6 32.9
  Aluminum ($ per metric ton) -3.0 -1.9 -7.1 -14.6 -12.7 26.0 13.0
  Copper Scrap (cents per pound) -3.0 -7.4 -7.5 -7.2 -16.1 29.3 17.3
  Steel Scrap ($ per ton) -2.8 -2.3 -12.2 -14.8 2.3 16.8 74.5
 Crude Oil & Benzene -5.2 -3.8 3.8 -12.3 -20.0 8.1 20.4
  Crude Oil (WTI, $ per Barrel) -8.4 -12.9 0.1 -20.7 -24.4 10.9 44.3
 Miscellaneous -3.8 -5.7 -4.6 -18.4 -14.8 -0.5 21.7
  Framing Lumber ($ per 1000 board ft.) -3.6 -2.0 3.0 -25.3 -23.1 20.0 12.9
  Natural Rubber (cents per pound) -18.0 -14.4 -7.6 3.2 -4.1 -29.6 89.4
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