Commodity prices have sunk to a 10-year low, thanks in part to fears of a weakening Chinese economy, according to Scotiabank.
The Scotiabank commodities index dropped 10.5% in August. That’s 13.9% lower than their lowest point of the 2009 recession, and their lowest since 2005.
“While many commodity prices, including key base metals, remain well above the 2008-09 recessionary lows, current commodity market weakness is broader based,” said Scotiabank commodities specialist Patricia Mohr.
“The financial market turbulence in China touched off fears of a hard landing in August and opened up questions over the medium-term outlook for China as a growth market for raw materials – especially for oil and metals.”
The good news is that China’s economy is expected to grow at 6.8% this year, thanks to monetary and fiscal policies. However, China’s economy is expected to grow at slower rate in 2016 – at about 6.4%.
“Medium-term, China’s potential to significantly lift world raw material demand will remain intact, even as it transitions to a consumer-and service-led economy,” Mohr said.
For B.C., key commodities include metals and forestry, both of which continue to fall in price. Scotiabank’s metal and mineral index fell 1.6% in August; the forestry index fell 3.5%.