Global| Aug 19 2019FIBER: Industrial Materials Prices Remain Weak
by:Tom Moeller
|in:Economy in Brief
Summary
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 [...]
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 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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