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Economy in Brief

FIBER: Industrial Commodity Prices Remain Firm
by Tom Moeller  April 11, 2016

Improvement in factory sector output continues to support pricing power in the industrial sector. The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) increased 1.0% during the last four weeks, and 5.8% during the last three months. Nevertheless, prices fell 7.9% during the past year as worldwide factory output remained under pressure.

Within the sector groupings of prices, the FIBER indexes showed increases in several categories. In the miscellaneous group, home building improvement raised framing lumber prices 9.2% last month and by 15.4% during the last six months. Prices for structural panels also gained 2.9% m/m, but were down 3.5% y/y. In the textile group, cotton prices jumped 2.8% last month, but remained down 10.3% versus last year. Also down by 1.3% m/m were burlap prices, though they've risen 16.6% y/y. Within the metals sector, pricing strength was uneven. Steel scrap prices rebounded 3.2% recently, but remained down by roughly one quarter versus last year. Other metals prices remained under pressure, with aluminum prices falling 5.0% last month and 15.4% in the last year. Copper scrap prices moved 3.2% lower m/m, and were down 20.5% y/y. In the crude oil & benzene area, earlier pricing strength eased. The cost of WTI crude oil declined 1.0% m/m to $37.01 per barrel, and 27.9% y/y. Nevertheless, prices remained up by roughly one-quarter during the last two months. Continuing to rise were prices for the petro-chemical benzene, up 4.0% last month but down 16.9% y/y.

Overall, commodity prices could improve further. The current industrial output projection from the National Association for Business Economics calls for 0.8% industrial production growth in 2016. That, however, is reduced from the earlier expectation of a 2.2% rise. In 2017, production is expected to increase another 2.1%. During the last ten years, there has been a 52% correlation between the three-month change in prices and the change in industrial output.

Commodity price data can be found in Haver's DAILY, WEEKLY, USECON and CMDTY databases.

Hopes and Fears About Oversupply Whipsaw Oil Prices from the Federal Reserve Bank of Dallas is available here.

FIBER Industrial Materials Price Index (1990=100) 1-Mth % 3-Mth % 6-Mth % 12-Mth % 2015 % 2014 % 2013 %
All Items 1.0 5.8 0.1 -7.9 -16.3 -10.0 -2.9
 Textiles 0.3 -1.0 0.3 -24.7 2.2 -4.2 0.4
  Cotton (cents per pound) 2.8 -7.0 -4.5 -10.3 2.6 -24.2 10.8
 Metals -2.8 7.0 -3.7 -16.0 -27.8 -8.7 -3.5
  Aluminum ($ per metric ton) -5.0 2.1 -3.2 -15.4 -19.2 9.4 -15.8
  Copper Scrap (cents per pound) -3.2 3.7 -7.1 -20.5 -27.0 -12.0 -6.8
  Steel Scrap ($ per ton) 3.2 19.9 -14.2 -24.7 -53.8 -18.6 8.4
 Crude Oil & Benzene 0.5 2.2 -8.6 -14.7 -19.4 -26.5 0.8
  Crude Oil (WTI, $ per Barrel) -1.0 4.5 -22.8 -27.9 -35.8 -43.2 10.3
 Miscellaneous 5.4 12.6 7.9 -3.2 -18.0 -6.7 -6.8
  Framing Lumber ($ per 1000 board ft.) 9.2 7.8 15.4 2.4 -16.4 -1.6 3.5
  Natural Rubber (cents per pound) 6.9 35.4 19.6 -1.3 -22.5 -32.3 -9.8
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