(October 31 – 11:20 ET) – TD Bank economists say that commodity prices retreated in October thanks to fears of slower U.S. economic growth.
The TD Commodity Price Index slipped by 2.1% in October, erasing some September’s 6% gain. In Canadian dollar terms, the TDCI fell only 0.4% in October, as the falling dollar insulated domestic producers.
“Commodity prices retreated in October as waves of weaker-than-expected corporate profit reports forced investors to reel in their expectations about return on investment to a level more in line with a slower pace of growth for the U.S. economy,” says Sheryl King, economist at TD Bank.
TD says the market turmoil reflects “a scaling back of unrealistically high earnings expectations” to a level that is more consistent with a soft-landing. “All told, high energy prices may shave as much as half a percentage point from U.S. economic growth in the coming year, but the solid labour-market picture will keep consumer confidence high and economic growth on a firm footing, which will be generally supportive of commodity prices over the next year,” adds King.
Base metal prices slipped on worries that the oil shock will cut world economic growth. Nickel dropped on weakening orders from the stainless steel industry. Lumber prices resumed their slide in October.
Gold slid on talk of central bank sales. Crude oil prices dipped to US$30 a barrel in late September thanks to the U.S. decision to tap its Strategic Petroleum Reserve, but prices resumed climbing in mid-October as political tension in the Middle East brewed and U.S. heating oil inventories remain low.
-IE Staff