The RBA has released its commodity price index for July, which registered a strong 4.1% jump in SDR (currency weighted) terms – the key determinant of the terms-of-trade – and a 1.1% rise in Australian dollar terms:
Preliminary estimates for July indicate that the index increased by 4.1 per cent (on a monthly average basis) in SDR terms, after declining by 0.6 per cent in June (revised). The increase was led by the prices of the bulk commodities, LNG and gold. Both the base metals and rural subindices increased in the month. In Australian dollar terms, the index rose by 1.1 per cent in July.
Over the past year, the index has fallen by 2.0 per cent in SDR terms and by 3.7 per cent in Australian dollar terms.
Over the July quarter, the index of commodity prices rose by 4.1% in SDR terms and by 4.7% in Australian dollar terms. Over the year, they were down by 2.0% (SDR terms) and 3.7% (Australian dollar terms) respectively.
The six month moving average trend in prices is presented below. As you can see, commodity prices have turned positive in recent months:
There is usually a strong correlation between the terms-of-trade and the RBA’s commodity price index in SDR terms, with a rise in the terms-of-trade ‘baked in’ for the June quarter (see here), and the beginning of the September quarter so far looking good.
