Scotiabank’s Commodity Price Index edged down by 0.2% in May. That’s its first decline since December. But despite equity market concern over the durability of the U.S. economic recovery, “many indicators suggest that the U.S. economy retains considerable underlying momentum, though growth will slow from the torrid first-quarter pace,” says Patricia Mohr, VP and commodities specialist, Scotia Economics.

“The ratio of U.S. business inventories-to-sales has fallen to a record low, pointing to considerable re-stocking of basic materials over the next six months,” Mohr says. “While commodity prices will likely level off over the seasonally slow summer months, another leg of price improvement is expected in the fall.”

A slight drop in the Oil & Gas and Metal & Mineral Indices and a more substantial drop in the Forest Products Index offset a gain in agricultural prices. The All Items Index has rallied by 11.1% since late last year, but remains 16.2% below it’s level of a year earlier

The Metal and Mineral Index edged down in May as slightly lower prices for many base metals just countered gains in gold, silver and several stainless steel additives – cobalt and molybdenum. LME nickel prices inched down from US$3.16 per pound in April to US$3.07 in May before rallying back to US$3.28 in mid-June. “Nickel prices have been above year-earlier trading levels since March and currently provide lucrative profit margins of about 30% for Canadian producers,” says Mohr.

West Texas Intermediate crude oil edged up from US$26.26 per barrel in April to US$26.87 in May and is currently over US$26. “Going forward, oil prices will be heavily influenced by the outcome of the June 26th OPEC meeting in Vienna,” says Mohr.

The Agricultural Index firmed in May as stronger prices for hogs, canola, barley and lobster more than countered softer wheat prices and largely unchanged cattle prices.