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A Tiger By the Tailby
Sean Corrigan
Thus, as the National Federation of Independent Business reported in its January survey: “Price hikes were pervasive in the service sector and it appears that things are looking up in agriculture. Providers of professional services also managed to post price hikes fairly frequently. There was no pricing power in production and distribution however, except in agriculture.” “Unadjusted, 25 pct [of respondents] planned hikes and 2 pct planned reductions. Still, price hikes are becoming more prevalent while price cuts are stable.” Or, as their bigger brethren at the ISM revealed: “Electronic Components; Propylene; Steel; Steel Plate; and Steel Sheet are the commodities in short supply. Commodities reported up in price are: Aluminium; Aluminium Extrusions; Brass; Cobalt; Coke; Copper; Electronic Components; Energy; Ethylene; Freight; Fuel Oil; Gasoline; Natural Gas; Nickel; Polyethylene; Polyethylene, Film; Propylene; PVC; Resin; Scrap Iron; Soybean Oil; Stainless Steel; Steel; Steel, Bar; Steel, Galvanized; Steel, Hot Rolled; Steel Sheet; and Sulphuric Acid. The commodities reported down in price are Caustic Soda; Corrugated Cartons; and Linerboard.” Uh-oh! In fact, ISM prices paid were the highest since the Bubble peaked in March 2000 and were the 2nd highest in a decade. The last time the index was this high, Fed funds were about to be hiked from 6% to 6½%. On top of this, the well-regarded Philadelphia Fed survey, though weaker overall than either the previous month or the mainstream’s perennially bullish expectations, came complete with the second highest forecast for prices to be received in 15 years, a level only beaten in that span in August 1994. Indeed, if this were a commodity, rather than an opinion, it would have set technicians’ pulses racing, breaking, as it did, a 23-year downward sloping trendline along the way. Looking to the prices of widely traded commodities for confirmation of this, we can see that the Journal of Commerce index has risen 49% annualized since last Spring – the fastest ever such rise. Steel prices, touched on above, are up perhaps 160% by some measures from recent lows while Aluminium is 50% above its 2002 nadir, Copper 120% and Tin 88% higher than their ’01 bottom – all of these three standing at 8½-year highs. Lead is at a 17-year high, having doubled in 4 months. Nickel had more than quadrupled at its January peak, but is still 3½ times its base – the best in at least 13 years. Zinc is up 50% to a 3½-year best. Gold has fallen back a touch from a 60% rise – a 14-year high; for Platinum, the numbers are 115% and the best in at least a quarter of a century; Silver is up by more than half to its best in 6 years; even Palladium is 60% off last year’s 7-year trough. Lumber has soared 93% in 9 months to break an 8-year trendline and to hit its best in 4½ years; Plywood is up 133% to 19-year peaks. Though still 7% shy of 2001’s massive and unprecedented spike, Coal prices are 50% above where they were a year ago. Crude is up 70% on early 2002 to a contract – if not yet a continuation – high in the top couple of percentiles of its last 20 years’ range. Although Nat Gas has fallen back from $7.50 to just above $5/MBtu, the past 13-weeks’ average is still 150% above the ’02 lows which happened to coincide with prices typical of the latter half of the 1990s. Down on the farm, Cotton had lately tripled to an 8-year high – its subsequent moderation still leaves it at twice ’02 levels. Coffee is up 50% in that same time. Beans have only bested current prices four times in 28 years and Soya Oil has consequently risen 70% in 6 months to 16-year highs. Corn is up 40% in those same 6 months to a 4½-year best. Palm oil – 180% over ’01 lows to a 5-year high; Rice – 130% from late ’02; Rubber up 135% in Yen, up 160% in dollar-linked Renminbi. Apologists have some merit in their protests that many of these price rises have been exacerbated by being reckoned in falling dollars, but remember that the Greenback has “only” lost around 25% of its trade-weighted value in the same period – a drop which comprises a small fraction of the gains in these diverse and fundamentally disparate commodity prices. Besides, how else should we correctly define “inflation” other than as a perceived surfeit of money compared to all the other goods (and the other kinds of money) into which it thus becomes ever more eagerly exchanged? February 26, 2004 Sean Corrigan [send him mail] writes from London. If you subscribe to Capital Insight, LRC benefits.
Copyright © 2004 LewRockwell.com
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