Politeía Digest

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WSJ-E: Prices of Raw Goods Plunge on Slowdown

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The sudden economic downdraft has caused one of the biggest and broadest declines in commodities prices since the financial crisis, surprising producers and creating a glut of raw materials around the world.

From crude oil to copper to cotton, prices were down an average of 9% since late February, based on the Dow Jones-UBS Commodity Index.

Crude-oil prices, well above $100 a barrel just two months ago, now fetch $84.96 on the New York Mercantile Exchange. Cotton prices have tumbled 22% so far this year. The benchmark steel price in the U.S. for hot-rolled coil is down 13% in two months, according to commodity-price reporting firm Platts.

The declines mark a sharp turnaround from just a few months ago, when economists were optimistic about the prospects for a U.S. economic recovery, China still seemed to be humming and commodity supplies were generally tight.

Since then, the outlook for demand has dimmed on growing evidence of a slowdown in China, a flare-up in the European debt crisis and new worries about the U.S. economy. On Sunday, China said the official purchasing managers’ index fell in June to a seven-month low.

Falling commodity prices are good news for consumers. In May, U.S. consumer prices slipped 0.3%, the first decline in two years, according to the Bureau of Labor Statistics. Gasoline, apparel and roasted coffee posted some of the biggest declines.

The recent declines could make it easier for Federal Reserve Chairman Ben Bernanke to take further steps to juice the U.S. economy without fear of driving up inflation. Falling oil and gas prices also could provide some help to President Barack Obama as he campaigns for re-election amid a lackluster economic recovery.

Commodities prices bounced higher on Friday after European leaders agreed to several measures aimed at addressing their debt troubles. But some investors said they don’t expect to see a substantial acceleration in commodities demand anytime soon. Read more in The Wall Street Journal.

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Written by Theophyle

July 2, 2012 at 8:39 am

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