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Economy in Brief

FIBER: Industrial Commodity Prices Improve in 2017
by Tom Moeller  January 2, 2018

The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) rose 1.3% during the last four weeks and gained 6.7% during all of 2017. That increase followed a 19.2% rise in 2016 and left prices 29.1% higher than the January 2016 low. Recent price improvement came as U.S. factory output increased 2.3% y/y through November following little change in 2016. Prices were additionally supported by a 3.7% y/y rise in Euro-area production and a 3.8% output rise in Japan.

Prices in the metals sector increased 3.9% during the last four weeks and rose 18.6 y/y. Strength was led by a 12.3% one-month rise in steel scrap prices which improved 16.8 y/y. Aluminum prices increased 4.7% over four weeks and rose by one quarter y/y. The cost of copper scrap improved 3.9% over the last four weeks and by 29.3% during the last year. Amongst other metals, lead prices improved 20.9% during 2017 and zinc prices rose 26.8% y/y. Prices in the crude oil & benzene group improved 0.7% last month, up 8.1% y/y. This gain was led by a 2.9% increase (10.9% y/y) in crude oil prices to an average $59.54 per barrel, the highest level since June 2015. Benzene prices eased 1.8% in the last four weeks, but rose 22.3% y/y. In the textile group, prices increased 1.2% last month and rose 3.0% y/y. Cotton prices strengthened 7.7% m/m and improved 9.8% y/y. That came after a 10.2% rise during 2016. Burlap prices held steady over the last four weeks, but worked 14.3% higher y/y. Prices in the miscellaneous group eased 0.7% during the last month, slipping 0.5% y/y. Framing lumber prices declined 1.4% in recent weeks but were up by nearly one-quarter y/y. Prices for structural panels fell 4.4% in the last month yet rose 16.8% y/y. Natural rubber costs improved 6.3% last month, but still were off 29.6% y/y.

Further price improvement may be coming. The current industrial output projection from the National Association for Business Economics (NABE) calls for a 1.9% increase in factory output during all of 2017 and a 2.3% rise in 2018. 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, factory sector production in the European Union and Japan is strengthening.

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

Characterizing the 2014-16 Slowdown in Investment from the Federal Reserve Bank of Kansas City can be found here.

FIBER Industrial Materials Price Index (%) 1-Mth 3-Mth 6-Mth 12-Mth 2016 2015 2014
All Items 1.3 -0.6 6.4 6.7 19.2 -16.3 -10.0
 Textiles 1.2 1.9 2.6 3.0 2.8 2.2 -4.2
  Cotton (cents per pound) 7.7 12.2 13.0 9.8 10.2 2.6 -24.2
 Metals 3.9 2.2 13.3 18.6 32.9 -27.8 -8.7
  Aluminum ($ per metric ton) 4.7 2.8 16.3 26.0 13.0 -19.2 9.4
  Copper Scrap (cents per pound) 3.9 10.7 22.1 29.3 17.3 -27.0 -12.0
  Steel Scrap ($ per ton) 12.3 0.6 10.8 16.8 74.5 -53.8 -18.6
 Crude Oil & Benzene 0.7 9.4 17.6 8.1 20.4 -19.4 -26.5
  Crude Oil (WTI, $ per Barrel) 2.9 15.1 34.5 10.9 44.3 -35.8 -43.2
 Miscellaneous -0.7 -9.2 -1.2 -0.5 21.7 -18.0 -6.7
  Framing Lumber ($ per 1000 board ft.) -1.4 0.7 8.8 20.0 12.9 -16.4 -1.6
  Natural Rubber (cents per pound) 6.3 -7.0 -3.1 -29.6 89.4 -22.5 -32.3
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