South Africa: 2018

Global commodity prices recover in October, although uncertainty persists

Global commodity prices increased for the first time in five months in October, expanding 1.9% over the previous month in October and contrasting September’s 1.3% decrease. That said, the rebound may only be temporary as concerns about the health of the economy persist, which could reduce demand for most commodities and thus push down prices.

October’s rebound in global commodity prices was broad-based with all the subcategories posting higher prices compared to the previous month. Energy prices recorded the strongest increase thanks to rising prices for coking coal and natural gas, as well as by still-higher oil prices. Surging prices for coffee and sugar propelled agricultural prices in October, while precious metals received a boost from both a surge in palladium prices and increased risks aversion. Base metal prices, in turn, were supported by a strong rebound in zinc prices and yet another healthy monthly gain in iron ore prices in October.

While FocusEconomics panelists still expect that global commodity prices will increase towards the end of this year in annual terms, the rise will likely be more limited than previously projected mainly due to the uncertain global economic outlook. Moreover, the gains expected for Q4 2019 will mostly stem from the surge in oil prices and its derivatives observed this year as well from sizable price increases for nickel, U.S. steel and some agricultural products. FocusEconomics panelists surveyed this month expect global commodity prices to increase 0.2% in Q4 2018 from the same period in 2017 (previous edition: +0.6% year-on-year).

Next year, global commodity prices are expected to increase at a faster rate due to a recovery in prices for base and precious metals. The Consensus among FocusEconomics panelists projects commodity prices will rise 3.1% in annual terms from Q4 2018 to Q4 2019