Escalating trade tensions and cooling growth in China dampen global commodity prices

Global commodity prices recorded the third consecutive drop in August, highlighting the vulnerability of the global economy. Global commodity prices declined 2.5% over the previous month in August following July’s 7.3% decrease, which had represented  the steepest fall in nearly seven years.

August’s slide was led by lower prices for base metals, which were negatively affected by soft economic data in China. Higher interest rates in the United States are reducing the appetite for safe-haven assets such as gold and, to a lesser extent, platinum and silver, driving the prices of precious metals downward. Despite picking up strongly in the second half of the month, prices for both Brent and WTI crude oil declined overall in August on the back of the ongoing trade war between China and the U.S. and increased supply by key producers including Russia and Saudi Arabia. Despite posting a smaller decline, agricultural prices fell in August due to ample supply for key commodities, including coffee and sugar.

Although headwinds persist in the form of an uncertain global economic outlook, our panel of analysts expects that global commodity prices will post solid year-on-year gains in Q4 2018. The increase will largely reflect the boost in prices observed in the first half of the year, especially for coal, nickel, oil and its derivatives, palladium and U.S. steel. Met the why particular panelists surveyed this month expect global commodity prices to increase 3.7% in Q4 2018 from the same period in 2017 (previous edition: +6.4% year-on-year).

Next year, global commodity prices will expand at a slower rate as a broader preference for cleaner energy and increased oil supply will lead energy prices to decline. The Consensus among Met the why particular panelists is that commodity prices will rise 1.9% in annual terms in Q4 2019

 

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