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Economy in Brief

FIBER: Industrial Commodity Prices Exhibit Broad-Based Strength
by Tom Moeller  December 8, 2016

Improvement in factory output worldwide has given life to industrial commodity prices. The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) increased 4.9% during the last four weeks, and has risen 17.7% during the last twelve months. That follows sharp declines from 2012 to 2015.

Within the sector groupings of prices, the FIBER indexes showed increases in each category. Within the metals sector, prices rose 12.0% last month, and by roughly one third y/y. Copper scrap prices jumped 19.7% during the last month, and by 26.5% y/y. Steel scrap prices gained 17.4% last month, and by nearly one-half over the last year. Aluminum prices similarly improved 1.1% in four weeks, and by 19.2% y/y. Zinc prices increased by 17.4% last month, and by roughly one-half y/y. In the textile group, cotton prices moved 3.3% higher during the last month, and were 13.6% higher versus last year. Showing more strength were burlap prices which jumped 6.9% during the last month, and by 14.7% y/y. In the miscellaneous group, natural rubber prices jumped a sharp 20.4% m/m to the highest level since early 2014. The recent softening of activity in home building activity, however, left framing lumber prices down 3.6% during the last three months, but they're still up 10.8% y/y. Prices for structural panels have been similarly under pressure of late, but up y/y. Crude oil & benzene costs have strengthened. WTI crude oil costs recently approached $50 per barrel, and they're up 15.8% y/y. Prices for the petro-chemical benzene improved 6.7% last month (4.7% y/y).

The current industrial output projection from the National Association for Business Economics (NABE) calls for a 1.7% increase in production during all of 2017, following a 0.9% decline this year. During the last ten years, there has been a 52% correlation between the three-month change in prices and the change in U.S. industrial output. In addition, moderate growth in factory sector production worldwide is continuing.

Commodity price data can be found in Haver's DAILY, WEEKLY, USECON and CMDTY databases. The NABE forecast is in the SURVEYS database.

A Discussion of Economic Conditions, Key Secular Trends and the Limits of Monetary Policy from the Federal Reserve Bank of Dallas can be found here.

FIBER Industrial Materials Price Index 1-Mth % 3-Mth % 6-Mth % 12-Mth % 2015 % 2014 % 2013 %
All Items 4.9 6.2 8.0 17.7 -16.3 -10.0 -2.9
 Textiles 1.2 3.4 3.3 3.6 2.2 -4.2 0.4
  Cotton (cents per pound) 3.3 7.8 13.9 13.6 2.6 -24.2 10.8
 Metals 12.0 15.2 20.7 39.0 -27.8 -8.7 -3.5
  Aluminum ($ per metric ton) 1.1 7.6 12.1 19.2 -19.2 9.4 -15.8
  Copper Scrap (cents per pound) 19.7 25.9 24.8 26.5 -27.0 -12.0 -6.8
  Steel Scrap ($ per ton) 17.4 -1.1 -16.1 48.9 -53.8 -18.6 8.4
 Crude Oil & Benzene 2.4 0.3 2.4 6.6 -19.4 -26.5 0.8
  Crude Oil (WTI, $ per Barrel) 3.0 4.6 -2.4 15.8 -35.8 -43.2 10.3
 Miscellaneous 3.1 3.5 4.1 18.4 -18.0 -6.7 -6.8
  Framing Lumber ($ per 1000 board ft.) -0.3 -3.6 -2.2 10.8 -16.4 -1.6 3.5
  Natural Rubber (cents per pound) 20.4 28.8 34.3 63.5 -22.5 -32.3 -9.8
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