ABJ – Aug 25 – Scotiabank's Commodity Price Index, which measures price trends in 32 of Canada's major exports, rallied back 0.8 per cent month over month in July to a level just two per cent below the April 2011 near-term peak.

The All Items Index was still a solid 26.1 per cent above a year earlier and 56.7 per cent above the April 2009 cyclical low.

"Commodity prices will likely lose ground in August, as economic growth forecasts for the United States and the Euro zone are marked down sharply," said Patricia Mohr, Vice-President of Economics and Commodity Market Specialist, at Scotiabank. "However, ongoing demand growth in the emerging markets-particularly China-will provide considerable underpinning as will ultra-low interest rates. Physical supply/demand conditions in many commodity markets are still tight-especially in copper, iron ore, the grains and oilseeds and fertilizers such as potash.

"In judging the outlook for industrial commodities, it is important to recognize the massive dominance of China," noted Mohr. "In the case of copper, China's consumption represents 37.3 per cent of world demand-1.26 times the combined total of the United States, Western Europe and Japan at 29.5 per cent. The comparison is even more striking for aluminum, the biggest volume base metal; China's consumption accounts for 43.7 per cent of the world total-1.56 times the 28.9 per cent of the United States, Western Europe and Japan combined.

"While sub-par growth in the United States and the Euro zone will no doubt slow metal-intensive manufacturing activity in China, which has benefitted from huge G7 outsourcing in the past decade, China's growth, under the new 12th Five-Year Plan, will increasingly be driven by internal domestic demand as well as expanding intra-Asian trade."

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