Rising trade protectionism and fears over global economic slowdown weigh on commodity prices in May

June 11, 2019

Global commodity prices posted the first month-on-month decline so far this year in May, falling 2.8% over the previous month. The print contrasted April’s 5.1% increase, which had represented the largest expansion in 15 months.

May’s drop in global commodity prices reflected lower month-on-month prices in 27 out of the 34 commodities included in the FocusEconomics survey. Therefore, all commodity groups logged lower prices compared to April, with base metals and energy leading the pack. Market participants were increasingly concerned about rising trade protectionism in the United States, with President Donald Trump enacting tariffs against China and India, while threatening other nations such as Australia with the same consequences unless they bend to the president’s demands. Moreover, signs that global economic growth remains fragile further unnerved investors.

Despite mounting uncertainties, FocusEconomics Consensus Forecast panelists surveyed this month expect global commodity prices to increase 0.7% in Q4 2019 compared to the same period in 2018 (previously reported: +0.8% year-on-year). The projected increase reflects a solid gain in prices for precious metal and agricultural prices, while base metal and energy prices are seen posting small declines. FocusEconomics panelists, however, project global commodity prices to fall 1.1% in annual terms from Q4 2019 to Q4 2020.

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