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Economy in Brief

FIBER: Industrial Materials Prices Remain Weak
by Tom Moeller  August 19, 2019

Declines in factory sector production continue to put downward pressure on prices. The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) declined 3.2% during the last four weeks. The price index was 11.5% weaker y/y and at the lowest level since June 2016. Prices declined broadly amongst product categories.

Remaining weak were prices in the crude oil & benzene category as they fell 4.4% in the last four weeks. Crude oil prices of $55.09 per barrel were up slightly in the last week, but remained below the $75.05 early-October peak. Prices for the petro-chemical benzene fell 13.0% during the last month (-20.0% y/y). Prices in the miscellaneous group continued under pressure and declined 4.2% during the last four weeks. Natural rubber prices fell 12.9% during that period, although they were 2.8% higher y/y. The cost of framing lumber weakened 4.4% during the last four weeks. Prices for structural panels fell 4.0% m/m and remained down by more than one-quarter y/y. Continuing to fall were industrial metals prices which were off 3.4% over the last month, reflecting a 4.1% decline in aluminum prices. Copper scrap prices weakened 4.0% during the last four weeks and the price of steel scrap declined 2.8%. Zinc prices fell 8.2% in the last four weeks (-7.2% y/y), but lead prices increased 4.0% over that period (0.7% y/y). Moving 1.0% lower during the last month were prices in the textile group. Cotton prices fell 3.9% and were roughly one-third lower y/y. Burlap prices also declined 3.8% in the last four weeks and 8.2% y/y.

Price weakness reflects a manufacturing sector that is stuck in recession. Overall factory sector output declined 0.4% during July and was down 0.5% y/y. Production of durable goods materials eased 0.6% both m/m and y/y while nondurable materials output slipped 0.1% (-2.9% y/y). After 4.0% growth last year in industrial output, the consensus forecast from the National Association for Business Economics (NABE) calls for a weaker 2.4% rise in industrial production during all of 2019 and a 1.8% gain next year. During the last twenty years, there has been a 56% correlation between the y/y change in industrial materials prices and the y/y change in factory materials 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 -3.2 -4.3 -5.3 -11.5 -12.0 6.7 19.2
 Textiles -1.0 -2.6 -3.9 -6.7 -2.8 3.0 2.8
  Cotton (cents per pound) -3.9 -12.1 -18.0 -31.7 -9.2 9.8 10.2
 Metals -3.4 -4.5 -9.4 -7.6 -12.2 18.6 32.9
  Aluminum ($ per metric ton) -4.1  -2.8 -5.6 -14.0 -12.7 26.0 13.0
  Copper Scrap (cents per pound) -4.0 -5.6 -7.0 -4.6 -16.1 29.3 17.3
  Steel Scrap ($ per ton) -2.8 -1.1 -12.2 -10.8 2.3 16.8 74.5
 Crude Oil & Benzene -4.4 -3.2 4.7 -10.9 -20.0 8.1 20.4
  Crude Oil (WTI, $ per Barrel) -4.6 -11.5 2.7 -17.5 -24.4 10.9 44.3
 Miscellaneous -4.2 -5.7 -7.0 -18.3 -14.8 -0.5 21.7
  Framing Lumber ($ per 1000 board ft.) -4.4 -2.3 -6.8 -21.6 -23.1 20.0 12.9
  Natural Rubber (cents per pound) -12.9 -13.7 -6.1 2.8 -4.1 -29.6 89.4
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