Commodity price index signals further terms-of-trade lift

The RBA has released its commodity price index for June, which increased by 2.1% in SDR (currency weighted) terms – the key determinant of the terms-of-trade – and by 2.3% in Australian dollar terms:

Preliminary estimates for June indicate that the index increased by 2.1 per cent (on a monthly average basis) in SDR terms, after increasing by 0.3 per cent in May (revised). The non-rural and rural subindices increased in the month, while the base metals subindex decreased. In Australian dollar terms, the index increased by 2.3 per cent in June.

Over the past year, the index has increased by 13.0 per cent in SDR terms, led by higher iron ore, gold and beef & veal prices. The index has increased by 19.4 per cent in Australian dollar terms.

Over the June quarter, the index of commodity prices rose by 1.9% in SDR terms and by 3.4% in Australian dollar terms. Over the year, they rose by 13.0% (SDR terms) and by 19.4% (Australian dollar terms) respectively.

The six month moving average trend in prices is presented below. As you can see, commodity prices are growing strongly:

As noted above, the SDR commodity price is a key determinant of the terms-of-trade (ToT), and suggests a further lift in the Q2 ToT and national income when the quarterly national accounts are released in early September:

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