The Materials Price Index (MPI) by S&P Global Market Intelligence increased 0.2% in August, returning to growth after two consecutive declines.

The increase was uneven, however, with exactly half of the subcomponents increasing. The MPI sits 6.3% lower than the same week a year earlier, indicating an easing in commodity prices over the last 12 months.

The nonferrous metal subindex was up 4.4%, with every metal from aluminum to zinc increasing. Traders turned bullish on demand after the US Federal Open Market Committee lowered the federal funds rate target by 50 basis points at its meeting on September 18.

Declining oil prices in recent months have also contributed to lower feedstock costs in chemical production, while demand concerns in the United States created further downward pressure on prices. With a rate-cutting cycle now underway in the US, monetary policy easing in other countries is becoming more widespread as fears of currency depreciation recede.

Consequently, we believe that commodity prices will experience a modest upside in the near term as easing monetary policy in Western economies offsets weak demand from mainland China.