(August 10 – 10:30 ET) – The TD Commodity Price Index slid almost 4% in July. According to a TD economist, a slowing U.S. economy pushed down prices.
The index had gained about 3% in each of the previous two months, thanks to energy gains. “Signs of a slowdown in some sectors of the powerhouse U.S. economy, the result of 175 basis points of interest-rate tightening by the Federal Reserve over the past year, sent many commodity prices into retreat in July,” says Sheryl King, economist at TD Bank.
Despite the threat of energy-driven inflation, TD says that so far it hasn’t materialized. “Central banks may not need to raise interest rates all that much more than they have already,” King offers.
Confusion surrounding OPEC’s production plans kept crude prices very volatile in July, although belief that Saudi Arabia is boosting production, coupled with relatively mild weather has helped subdue prices. Demand for the heating oil and gas in preparation for winter should keep prices strong.
Weaker residential construction in the U.S. and Canada pushed lumber prices to their lowest level since mid-1995. Strong world demand is keeping pulp and newsprint prices up, although there is concern that prices can’t go much higher without hurting demand. Most base-metal prices were up in July, except for nickel which struggled with low demand. Wheat prices fell sharply in anticipation of good harvests in the U.S.
-IE Staff