It took nearly 12 months for several key commodity prices during President Donald Trump’s first year to surpass their levels on President Barack Obama’s final day in office. Commodity prices had bumped along mostly sideways until a late rally in fourth-quarter 2017.
Some are now up sharply in recent weeks, lending support to the broader economic debate around inflation. The US Federal Reserve’s mid-range inflation forecast is at 1.9% for this year and 2% for 2019; however, many material and feedstock prices are up 2%-12% compared with this time a year ago. S&P Global‘s latest US economic outlook forecasts the Consumer Price Index to rise 2.2% this year.
High wages and low unemployment are generally viewed as the key drivers of higher inflation, but the pass-through impact of basic commodity prices to consumers is also a factor. For example, increases in the prices of steel and aluminum generally get passed along to consumers in the form of higher prices for cars and appliances.
Seven of the 11 benchmark commodity prices being tracked by S&P Global Platts since Trump took office are now an average of 5% higher compared with when Obama left.
Dated Brent crude’s running average during the Trump era was $55.45/b for the January 20, 2017 – January 31, 2018, period, compared with $53.31/b on January 19 a year ago. NY fuel oil’s running average was at $48.59/b for the same period, up from the January 19, 2017, mark of $47.03/b. The biggest running average gains since the inauguration have been charted by Chicago gasoline (+11.6%), jet fuel (+7.9%) and COMEX gold (+6%).
But the running average prices of iron ore (-11.6%), thermal coal (-6.7%), natural gas (-5.6%) and steel (-0.28%) remain lower than Obama’s last day on the job.
What’s more, nine of the 11 benchmark prices being tracked continue to average price levels well below Obama’s two-term averages. US-made hot-rolled steel coil and Central Appalachian thermal coal are the two commodities averaging slightly stronger pricing after Trump’s first year in office compared with their averages over eight years of Obama.