The Materials Price Index (MPI) by S&P Global Market Intelligence turned up 0.6% in early June, reversing nine consecutive weekly declines.

The increase was mixed, however, with exactly half of the 10 subcomponents rising. Despite last week’s price rise, the story so far for the year remains one of falling commodity prices, with the MPI decreasing in 17 of the last 22 weeks. The index also sits 36% below its level at this time in 2023.

Rising iron ore prices were the major driver of the recent increase in the MPI. The main reason for this increase was news that the six state-owned banks in China planned to cut deposit rates, which were expected to boost construction activity. This news also led traders to speculate that further stimulus measures would be implemented, creating optimism on near-term demand conditions. However, global chemical prices have now fallen 20% since mid-April because of oversupplied markets, low feedstock costs, and weak demand in China.

Strong consumer credit data in the U.S. added some optimism but also suggested that inflation remains stubbornly high. Consumer credit outstanding increased at an annual rate of 5.7% in April, the month following the failure of Silicon Valley Bank. Higher interest rates, uninspiring Chinese output, and globally weak demand will ultimately lead to lower commodity prices through this year.