The Bank of Montreal Commodity Price Index slipped 8% in July, but bank economists believe that prices will rebound with renewed economic growth later this year and into 2002.

The sharpest declines were in the energy sector, as the Oil & Gas Index plunged 14.2% in July to a level 18.5% below its year-ago level. The spot price for natural gas has seen the sharpest decline — down more than 70% so far this year — in response to rapidly rising inventories and weak demand through the first seven months of this year.

Similarly, the Forest Products Index and the Metals & Minerals Index fell during July as markets perceived softer demand. Within the metals segment, soft global demand for copper, nickel and aluminum pushed the spot price for all three metals down during July. BMO economists expect the prices to remain weak in the very near term.

Agriculture was the exception in commodity prices in July. Weather-related concerns for the crops of corn, soybean and canola and tightening supplies of wheat combined to push Bank of Montreal’s Agricultural Index up 1.1% in July.

“The current economic trough and the weakness in agricultural prices have pushed the Index down sharply so far this year,” said Earl Sweet, assistant chief economist at BMO. “Longer term, however, we think that the rebound in the U.S. and world economies will turn commodity prices around. Producers have reduced capacity through shut-downs and mergers, thereby holding back supply growth. Demand, however, should start to grow again as economic growth accelerates through 2002. The combination of industry restructuring and a healthier macroeconomic environment next year should provide good stimulus to commodity prices.”