Raw Materials Don't Quite Have Spring Fever Yet

It was only a month or two ago that a pickup in industrial-commodity prices spooked the inflation-wary financial markets. Since early March, however, the Journal of Commerce's price index of 18 industrial commodities has dropped by 4.3%, and the Commodity Research Bureau's closely watched spot-price index of industrial raw materials has fallen to a six-year low.

The big question is whether the reversal means the upturn is losing steam. Economist Edward E. Yardeni of C.J. Lawrence Inc. attributes the latest downdraft to weak industrial economies overseas and to continuing metals sales by the former Soviet Union to meet an acute need for hard currency. "Industrial-commodity price movements today are responding to global economic pressures," he says. "We think the U.S. industrial recovery remains on track."

But Wall Street economist Howard Sharpe isn't so sure. "The Russians were also dumping metals a few months ago when industrial-commodity prices were moving higher," he says. Noting that the sensitive materials component of the index of leading indicators will be down in April, he finds it difficult to believe that the factory sector is gaining much strength when industrial commodities seem so weak.

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