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Our Materials Price Index (MPI) increased 1.3% last week,
building on a nearly 1.0% increase in the previous week. Price
movement was mixed with three of the ten MPI sub-components down
last week. Commodity prices as measured by the MPI are up 88%
compared to the same week in 2020, though the MPI is about 3% below
its recent peak in early May.
The largest gains in the MPI were seen in freight and chemicals
prices. Freight prices increased 3% last week, their
fourth-consecutive rise, though ocean-going charter rates remain
significantly below their peak mid-May levels. Global logistics
services remain in a state of near turmoil and continue to be one
of the principal reasons for the strength in goods price inflation.
The MPI's chemicals sub-component, however, was the larger driver
pushing the overall index higher last week, posting a 3.6% gain.
This increase followed an increase of almost the same magnitude in
the previous week. Global ethylene prices have been the main reason
for the recent strength in chemicals prices, recording an average
increase of 9.4% across regions last week. The unusually large
increase points back to the recent run-up in oil prices. In the US,
where ethylene price increases were strongest, recent unplanned
outages have also left inventory tight and contributed to the large
weekly movement. On the downward side, rubber prices posted a 4.2%
decline last week, extending the run of recent price reductions to
six weeks. The pullback in production by Chinese tire manufacturers
continues to impact rubber demand.
Last week was upbeat for financial markets, with the S&P 500
equity index closing at a record high on Friday. The release of the
Global PMI data last week indicated continued economic expansion in
June, though the data suggest economic activity in emerging markets
is lagging developed economies. With many large exporting nations
seeing rising COVID-19 infections, supply delays have worsened. The
global manufacturing PMI for delivery times increased in June to
its highest level since the onset of the pandemic. This week will
feature updates on broader inflation indicators for the US, the UK,
and the eurozone. While we expect commodity prices, as measured by
the MPI, to decline over the rest of the year, the data releases
this week will shed some light on how recent movements in commodity
markets are impacting prices downstream.
Posted 14 July 2021 by Thomas McCartin, Senior Economist, Pricing & Purchasing, IHS Markit
