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EU data and the Baltic Dry Index point to higher commodites prices

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(Kitco News) - European data this morning in regards to the construction and producer prices have been higher than expectations this morning. 

Eurozone Construction Output for the months of March (M/M) hit 2.7% vs the previous figure of -2.1%. The year-on-year figure for the same month grew massively to 18.3% (prev -5.8%). The report said, civil engineering increased by 9.4% and building construction by 1.3%. In terms of where the growth came from, the highest increases in production in construction were recorded in Hungary (+11.5%), Germany (+10.8%) and Slovakia (+9.0%). Decreases were observed in France (-7.3%), Sweden (-3.1%) and Spain (-0.9%).

Elsewhere earlier on the session German producer prices rose 5.1% year-on-year vs the previous reading of 3.7%. Mixing the information of the two data pieces we have received this morning shows that the prices of commodities could still rise further. Market commentators are predicting that the likes of copper and iron ore could continue to rise but it's not only there that inflation is hitting producers.

The Baltic Dry Index tracks the shipping costs of moving these products around the world. The chart (weekly) below shows the extent of the price rise (614%) since May 2020. This can be considered as a proxy for the demand for raw goods and materials and this mixed with the data above and the price rises show that the demand shows no real sign of slowing down. 

Tomorrow we could get some more clues to the extent of the situation as the major nations deliver their latest manufacturing PMI results for May. Many of them are expected to fall slightly from last month's reading where many of the major nations had record numbers. Germany is expected to produce a reading of 65.9 with the previous at 66.2 and the U.S. number is expected to fall marginally to 60.2 (previous 60.5).

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