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May 21, 2015- Weekly Pricing Pulse
The IHS Materials Price Index (MPI) fell 2.3% last week, driven by softness in aluminum, oil, and ethylene markets. Despite the drop, the five-week rise in exchange-traded commodities has positioned the MPI just a touch below its 26-week moving average.
Iron ore prices and freight rates have rebounded since hitting lows last month. That said, both remain roughly half what they were at the start of 2014. Although the paper rally in iron ore markets has momentum, there has been no significant change on the supply side and no improvement in demand, suggesting it is likely to run out of steam soon.
The latest data out of China were disappointing, particularly given the increasingly accommodative environment, with fixed asset investment falling to a 14-year low and retail sales to a 15-year low. Meanwhile, US data have continued to underwhelm, with consumer sentiment, industrial production, and retail sales again posting lackluster numbers last week. There are some signs of tightness emerging in US labor markets; however, with inflationary pressures still largely absent, timing the first interest rate hike in a decade will remain a challenge for the Federal Reserve.