Falling metals prices drag commodity index

A sharp drop in metals prices in November contributed to a reduction of 1.3% in Scotiabank’s all- commodity price index for that month.

Economist Patricia Mohr reported a 2.9% monthly drop in the metals and minerals index from October. The decline continued in December, she said. The sub-index is down 15.5% from November, 1988.

Slumping car sales in the United States, Mohr said, forced automakers to schedule a 15% drop in their fourth-quarter output last year, which acted to reduce demand for copper, lead and zinc.

Car sales have reached their lowest level since 1983. Mohr said sales will probably rebound moderately this year, but not to the same levels as in 1989 or 1988.

On commodities in general, Mohr said that despite continued strong demand in western Europe and Japan, commodity prices moved broadly lower in 1989 “as U.S. manufacturers reduced raw material inventories in a slower sales environment.” Many resource prices are expected to fall further this year as Japan undergoes a similar inventory correction.

The all-commodity index tracks export prices of a variety of Canadian commodities, which are weighted according to their 1984 export values, except crude oil where the value of net exports is used.