Bridge/CRB Index Slips to 12-Year Low at 198.12
Deflation knocked louder at the door of the U.S. economy as the Bridge Commodity Research Bureau index ended the day at a 12-year low.</br></br>The index, composed of 17 major commodity prices, slipped early in the day below an August 1992 intraday low of 198.17 -- seen as a key benchmark -- and dipped to 197.72 before settling down 1.65 at 198.12. That marked its lowest close since 1986. The move was the latest slip in the index's year-long 39.57-point fall from 237.69, signaling commodity markets' two-year bear market may be picking up steam rather than abating.</br></br>The Goldman Sachs index of spot commodity prices also slipped 1.41 to 139.6070, its lowest level since 1977.</br></br>Most industry observers don't believe commodity prices will recover any time soon. "It's falling like a stone," said Ray Murphy, president of RTM Management Inc., who helped Bridge/CRB create a CRB total-returns index tailored to investors like pension funds. "There's plenty of supply of everything and no demand. Where it bottoms out could be anyone's guess."</br></br>And the free fall could have implications for other areas of the economy as well. Robert Hafer, managing director at Bridge/CRB, said the CRB traditionally is an advance indicator of what conditions will be like in six to 12 months. He says if deflation spreads, it will show up next in producer prices and then consumer prices. That, he said, could necessitate a cut in interest rates. For now, however, the inflation-shy Federal Reserve appears unwilling to consider such a move.