Commodity prices to remain soft until 2002, BMO says
theglobeandmail.com
POSTED AT 12:10 PM EDT Thursday, September 06
Commodity prices will remain relatively lacklustre until 2002, according to a report from the Bank of Montreal.
“We believe many commodity prices are close to bottoming out, but do not expect meaningful gains until the global economy moves onto a stronger growth path next year,” said Earl Sweet, BMO's assistant chief economist.
The call from the bank's economists came even though its commodity price index edged up 2 per cent in August to a level of 112.7, up from an 8-per-cent decline in July.
BMO said last month's advance “is not considered a convincing reversal of the index's downward trend since last December.”
Much of the increase in the bank's recent commodity price index rise reflected a temporary surge in energy prices, the bank said. Its oil-and-gas index rose 5.1 per cent in August but remained below the level it was at a year earlier, the bank noted.
“Weak natural gas prices reflect softer demand by industrial users and power generators and a moderate improvement in supply in response to exceptional increases in drilling activity during the past year,” said Mr. Sweet.
His longer-term forecast for energy remains bullish.
“As the economy strengthens and industrial users and power generators switch back to gas, price increases will be required to bring frontier resources into development and encourage conservation.”
A slight climb from the forest products index added to the over-all advance last month, Mr. Sweet said, largely reflecting the imposition of U.S. duties on Canadian softwood lumber.
BMO's metals-and-minerals index fell again in August, placing it 12.2 per cent below its August 2001 reading. Its agricultural index slipped 3.6 per cent in August, one month after gaining ground. |
