An uncertain global economic outlook continues to weigh on commodity prices

Global commodity prices recorded a fourth consecutive monthly decline in September due to slowing growth in China and widespread uncertainties over the evolution of the global economy. Global commodity prices declined 1.3% over the previous month in September, moderating from August’s 2.5% decrease.

September’s decline in global commodity prices reflected a sizeable drop in prices for agricultural products due to strong harvest pressures and spillovers from the trade war between the United States—a major supplier of agricultural products—and China—a key global buyer of food. Base metal prices continued to retreat in September on the back of softer growth prospects for China, the largest purchaser of base metals worldwide. On the flip side, energy prices climbed in September, mainly reflecting the ongoing rally in oil prices due to supply concerns. While the price for precious metals was largely unchanged, a more detailed analysis reveals that this was mostly due to soaring palladium prices.

Although global commodity prices will rise overall this year, the pace of increase is gradually slowing, which reflects an increasingly uncertain global economic outlook. Moreover, the increase expected by the end of this year will be mostly driven by higher prices for oil and its derivatives as well as for nickel, U.S. steel and some agricultural products. FocusEconomics panelists surveyed this month expect global commodity prices to increase 0.6% in Q4 2018 from the same period in 2017 (previous edition: +3.7% year-on-year).

Next year, global commodity prices will expand at a faster rate due to a recovery in prices for base and precious metals. Conversely, the rally in energy prices is expected to end next year and prices are predicted to moderate. The Consensus among FocusEconomics panelists is that commodity prices will rise 3.0% in annual terms from Q4 2018 to Q4 2019

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