Commodities Economic Outlook July 2018

Commodities: Economic Outlook Commodities July 2018

July 11, 2018

Growing geopolitical tensions weigh on global commodity prices

Global commodity prices declined for the first time in three months in June. The fall, however, was minimal (June: -0.1% month-on-month; May: +0.9% mom). Developments related to U.S. sanctions against Iran led the two benchmark oil prices, along with their derivatives, to decline in June, while the ongoing trade spat between the United States and China sent key agricultural commodity prices down. Moreover, higher interest rates in the U.S. due to robust economic growth are diminishing the appetite for safe-haven assets, such as gold, negatively impacting their prices. That said, high geopolitical risks are supporting precious metals to some extent. On the flip side, base metals continued to benefit from higher prices for U.S. steel, stronger preference for greener industries and fears of output disruptions.

The panel of analysts surveyed this month by FocusEconomics expects commodity prices to increase 6.9% in Q4 2018 from the same period in 2017, mainly due to higher energy and agricultural prices.

Next year, analysts expect that a correction in energy prices, especially for oil and coal, will lead global commodity prices to post a smaller increase. The Consensus view among FocusEconomics panelists is that commodity prices will rise 1.2% in annual terms in Q4 2019.

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