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October 8, 2015 - Weekly Pricing Pulse
The IHS Materials Price Index (MPI) continues to trend lower. Last week the decline came to 0.8%, on the back of 2.0% drops in chemicals and ferrous metals prices. Oil, nonferrous metals, lumber, and rubber also fell. Generally weak purchasing managers' index (PMI) reports (notably China) and the disappointing US employment report reinforced negative sentiment in commodity markets. The MPI is now at a low for the year, having pushed below its previous trough set back in August.
Russia, however, is coming to dominate the news flow. The country's intervention in Syria stands out, in addition to news that government officials are ready to meet with OPEC to discuss market conditions—both developments are providing some more recent support to oil prices.
Looking ahead, our expectation is that the MPI will record a 0.9% decline next week, a development linked to our overall fourth-quarter bottoming-out projection. Russia's actions in Syria will also continue to focus minds on oil markets, especially if the conflict escalates and threatens broader Middle Eastern stability. We would also expect added volatility as the fourth quarter progresses should further weakness create questions about a December US interest rate hike.