A large jump in metals and forest product prices resulted in a 2.2% increase in the Bank of Nova Scotia’s commodity price index in January, the sixth consecutive monthly gain.
The bank’s all-items index was 5.9% higher than it was a year ago, while the metals and minerals sub-index rose 4.8% from December and was reported as being 36.3% higher than in January, 1994.
Strength in base metals was widespread in January. However, prices eased in early February as signs of a slowdown in the U.S. economy boosted bond prices and led some investment funds to liquidate positions on the London Metal Exchange. “The correction has been mild but sharper for zinc because of a relatively large inventory overhang,” writes economist Patricia Mohr. In the short term, Mohr says, gains in base metal prices may be checked by a slowdown in interest-sensitive sectors in the U.S economy (in particular, housing) and by additional supplies from global mine reactivations and expansion.
She adds, however, that overall metal demand in the U.S. will continue to be strong this year; motor vehicle output in that country will reach a record level during the first half of this year; non-residential construction is picking up; and orders of durable goods are robust.
The all-commodity index tracks export prices of various Canadian commodities, which are weighted according to their 1984 export values (except crude oil, for which the value of net exports is used).
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