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July 7, 2017 - Weekly Pricing Pulse
The gains have spread across the MPI subindices, finally propelling the main index higher.
The IHS Materials Price Index (MPI) rose for the first time in just over a month last week, gaining 0.2%. Oil and metals markets drove the index higher. The oil subindex gained 2.9%, with nonferrous metals up 2.9% as well. The broad-based gains across the MPI's subcomponents continue to spread. Only chemicals and freight fell last week, both heavily influenced by oil-price declines in early June.
Oil prices moved higher each day last week, as US drilling activity moderated for the first time since January, while US crude output fell in April for the first time this year. Metal prices also posted solid increases—aluminum, copper, and nickel all registered good gains, while iron ore partially reversed the steep declines seen over the last few months.
Last week there were several positive macroeconomic announcements that helped buoy commodity markets. In the Eurozone, economic sentiment recovered in June, up 2 full points at 111.1, further highlighting the growing strength of the currency bloc. In China, the Federation of Logistics and Purchasing Managers' manufacturing purchasing managers' index (PMI) came in at 51.7, a slight improvement from May. Finally, the US dollar also continued to slide, providing general support to commodity markets. We have felt for some time that a slow improvement in fundamentals would "soon" end the four-month slide in commodity prices. While one week does not a trend make, we feel the increasing number of MPI subcomponents posting increases across June at the very least highlights the limited downside now present in markets. More particularly, we feel July and August will provide definitive signs that the global expansion continues to roll forward.