ISM Commodities Survey Turns Negative

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Includes: BCM, CMDT, COMT, DBC, DDP, DEE, DPU, DYY, FTGC, PDBC, RGRC, SBV, USCI
by: Bespoke Investment Group

In the wake of Monday's Prices Paid Index of the ISM Manufacturing report dropping to its lowest levels since the Summer of 2012, the number of commodities rising in price also predictably fell. According to ISM, manufacturers noted that three commodities rose in price during the month of November, while ten declined. With a net reading of negative seven, more commodities are down in price than at any other point since June 2012.

So why is this notable? The chart below compares the three month average of the monthly net number of commodities rising in price to the year/year change in CPI. As the chart illustrates, moves and directional shifts in this three month average have tended to track changes in the CPI. Therefore, with the average declining to negative territory this month, while the y/y CPI will unlikely get down into negative territory, we would expect the pace of inflation to show further declines.