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November 25, 2016 - Weekly Pricing Pulse
Underlying volatility was muted, as the oil and ferrous subindexes exhibit restraint following several weeks of exceptional activity.
The IHS Materials Price Index (MPI) rose 1.2% this past week, its largest increase since the middle of August. Oil broke out of a four-week downtrend, with strength also provided by rubber, which rose 3.5%, and fiber prices, which jumped 5.8%.
Following a period of intense volatility, commodity markets were far calmer last week. Oil prices rose 0.6%, with sentiment a bit more positive on prospects for an OPEC production agreement. The ferrous subindex, which for the past two weeks had seen huge gains because of rallies in coal and iron ore, moved up another up 2.5% last week. The largest mover this week, however, was the fiber subindex, which jumped 5.8% driven by rising polyester prices.
Last week saw several significant macroeconomic data releases, although commodity markets were still being directed by reaction to the US election. Eurozone industrial production fell during September, down 0.8%, as consumer durables production slumped 5.6% after a spike in August. However, industrial production is particularly volatility in the third quarter due to the timing of plant shutdowns for the summer holidays. In October, US industrial production was flat month on-month, although the manufacturing component gained 0.2%. In the United Kingdom, input costs surged 4.6% month on month, as the weaker pound, combined with increasing commodity prices, finally began to affect producers. Our expectation is that the headline index will remain fairly flat in the coming weeks, perhaps even eking out slight gain. That said, we continue to see a period of volatility around a mid-December US interest-rate increase.
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