Oil Price Decline Gives Misleading Picture of Commodity Trends
However, the fact is that the oil price decline is not reflective of a broader bear market in commodities. Indeed, the fact is that the bull market in non-energy commodities have continued. The Economist's
commodity price index (which include most commodities except energy and precious metals) have continued rising rapidly. In the latest issue, the index fell back slightly from last week, from 184.7 to 183.8. Yet it is still near its record high, up 6.7% the latest month, and a full 36% the latest year.
Another index measuring non-energy commodities, the CRB Spot Index, have increased somewhat more slowly than The Economist's commodity price index, yet it is at record high levels and is up 2.5% in the latest month and up 18% the latest year.
We can thus see that the decline in oil prices reflect oil specific factors (such as a declining fear of a U.S.-Iranian military confrontation) and is unrepresentative of the broader commodity price trend. This means that the much hyped "core" price inflation measures is not likely to decelerate, despite the slowdown in U.S. economic growth.