Quality Magazine

Industrial Price Index Positive for First Time in 11 months

July 28, 2009

NEWARK, N.J.-The Journal of Commerce-Economic Cycle Research Institute index of global industrial prices moved into positive territory for the first time in almost a year in its most recent week, signaling an improvement in global demand for the raw materials that go into industrial production, according to the Journal of Commerce.

The Industrial Price Index (IPI), based on the daily prices of raw materials used in industrial production, ended the week of July 24 more than 3.3 percentage points higher than the previous week, reaching 86.1637, the highest point for the IPI has since Oct. 24, 2008.

The gain marked a 4.54 percent improvement over the index's average during the previous 52 weeks, the first time the IPI has grown since the first week of August 8, 2008, shortly before the onset of a steep decline in world financial markets.

"That's a pretty dramatic recovery when you consider that we were at minus 69.9% on December 8," says Lakshman Achuthan, managing director of ECRI, a New York-based economic forecasting firm that compiles and tracks a number of leading indicators for economic activity around the world.

"That's very consistent with the restarting of global industrial activity. In some cases that's associated with an outright upturn in the business cycle of some economies," he says.

The upturn is occurring in the United States and Asia, excluding Japan and the United Kingdom. "The industrial upturn is now being joined by a broader economic recovery," says Achuthan. "But in continental Europe and Japan, the recovery is not yet in clear sight."

The IPI has fluctuated in the low 80s since June 5, and after two weeks of downticks, the index moved up 3.33 points to its 2009 high of 86.1637 for the week ending July 24.

On a strict year-over-year basis, the index remains far below the 132.2840 recorded a year ago, but the sequential increase suggests growing confidence and competition for raw materials in industrial markets.