Signs that the rebound in commodities has about run its course. As coal prices in particular fade.
The Reserve Bank’s Commodity Price Index for February fell 0.9% in Australian dollar terms last month after a 3% rise in January (originally a 4.1% rise).
The RBA said that preliminary estimates for February indicate that the index increased by 1.7% (on a monthly average basis) in SDR terms (Special Drawing Rights, an international ‘currency’ for IMF members), after increasing by 4.2% in January (revised down from 5.3% originally reported).
"An increase in the price of iron ore was partially offset by a lower coking coal price. Both the rural and base metals subindices increased in the month,” the RBA said.
Over the past year, the index has increased by 56.0% in SDR terms, led by higher coking coal and iron ore prices. The index has increased by 41.0% (43.7% to January) in Australian dollar terms.
“Consistent with previous releases, preliminary estimates for iron ore, coking coal, thermal coal and LNG export prices are being used for the most recent months, based on market information,” the RBA said.
“Using spot prices for the bulk commodities, the index rose by 0.6 per cent in February in SDR terms, to be 55.5 per cent higher over the past year."
The surge in commodity prices at the end of 2016 saw a 9.1% jump in our terms of trade in the three months to December, according to yesterday’s national accounts.
Secondly, the current account deficit narrowed to its lowest share of GDP since 1980, at $3.9 billion in the December quarter (0.9% of GDP). This reflected an improvement in the trade balance to a record $4.7 billion surplus. The trade figures for January will be issued later today.
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