Scotiabank’s Commodity Price Index, which measures price trends in Canada’s major exports, slipped by 3.3% in July after a post-war bounce in May and June.

“Despite weaker prices in July, the All Items Index remains 17.1% above a year earlier. Commodity prices are expected to gather further strength in the fourth quarter and in 2004 with some broadening out of the improvement from energy to pulp & paper and base metals,” said Patricia Mohr, vice president and commodities specialist, Scotia Economics, in a statement release Friday.

“Investor interest in the ‘deep cyclicals’ is starting to heat up, given the prospects for a moderately stronger pace of U.S. growth in the second half of 2003,” Mohr added.

The Oil & Gas Index lost ground as mild summer weather checked U.S. electricity demand for air conditioners, pulling down Canadian natural gas export prices..

The Forest Products Index moved ahead in July, with gains in lumber, oriented strand board and supercalendered paper offsetting price declines in pulp and uncoated freesheet paper.

The Metal and Mineral Index edged down in July alongside a sharp reduction in Western Canadian sulphur prices to China. In contrast, base metal prices continued to climb.

“The medium-term outlook for nickel prices is exceptionally strong, with prospects for rising global stainless steel demand in the next several years and only marginal greenfield mine capacity coming on stream until 2006,” said Mohr.

The Agricultural Index lost ground in July, as sharply lower cattle prices and moderate declines in hog and grain prices offset stronger Atlantic Coast lobster prices.

“The removal of the U.S. ban on live cattle has been complicated by demands from Japan, that U.S. beef exports be certified free of any Canadian beef as of September 1, despite no measurable risk to health,” said Mohr.