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July 14, 2017 - Weekly Pricing Pulse
The IHS Materials Price Index (MPI) rose again last week, moving up 2.5%. Once more it was oil and metals that drove the overall index higher. Gains were not confined to these two subcategories, however. As has been the case since mid-June, gains were posted across a majority of the MPI's subcomponents.
Oil price increases early last week were not completely erased by a slump on Friday after data showed US production and rig counts rose and OPEC exports hit a 2017 high. Although the mood clearly soured Friday, with prices falling nearly 3%, gains from Monday through Thursday had ensured the oil subindex still rose 3.6% for the week. The ferrous subindex jumped 9.7% last week. Steel markets have seen a strong turnaround in sentiment over the last few weeks, with iron ore and scrap prices rebounding from May and June levels that now look too weak.
Last week positive macroeconomic announcements continued to flow in, helping improve market sentiment considerably. In Germany, the Markit Manufacturing PMI hit a fresh 74-month high, at 59.6, while the Eurozone manufacturing PMI hit 57.4—the second-quarter showing was its best reading since early 2011. In the United States, nonfarm payroll employment added 222,000 jobs in June, with revisions to prior months adding another 47,000 jobs. Tighter conditions in financial markets will act as a headwind for commodities, to be balanced against what continues to be a steady expansion in manufacturing activity. For commodities, this dynamic suggests support rather than pressure on prices.