(April 6 – 10:10 ET) – Softening world demand pushed commodity prices lower during the first quarter, say TD Bank economists.

The TD Commodity Price Index, which tracks the price movements of 18 major Canadian resource exports, dropped by 14% in the first three months of 2001, giving up all the gains since last summer.

“The retreat in the first three months of the year was steady andbroadly-based, with falling prices for oil and gas, forest products, base metals and precious metals,” says Craig Alexander, senior economist at TD
Bank.

The recent decline in commodity prices has contributed significantly to the current weakness in the Canadian dollar, says TD. “Although Canada has a diversified economy, commodity prices still play a key role in the country’s international trade balance and in the nation’s corporate profit picture,” says Alexander.

However, prompt rate cuts by central banks around the globe and stimulative fiscal policies in several major industrial countries are expected to lead to stronger world demand and higher commodity prices late in 2001.

In the near term, lumber prices are likely to twist and turn in line with developments in the U.S.-Canada lumber dispute. Supply cutbacks by OPEC are expected to keep the price of crude oil from falling below US$25 per barrel on a sustained basis. Natural gas prices may decline, but are expected to remain historically high.
-IE Staff