CHICAGO – The longest commodity slump in more than two decades is helping to keep U.S. inflation in check as consumers benefit from cheaper supplies of everything from gasoline to peanuts.
Record-large crops this year sent corn, soybeans and wheat into bear markets. Rising oil output reduced fuel prices for U.S. motorists to the lowest for this time of year since 2010. In China, which once sparked a decadelong commodity rally, slowing economic growth left world gluts in cotton and steel.
The Bloomberg Commodity Index of 22 raw materials slid to a five-year low this week, after consumer prices in August fell for the first time in 16 months and the dollar surged. Lower costs are boosting profit at Delta Air Lines, the Gap Inc. and J.M. Smucker Co., the maker of Jif peanut butter. That's giving the Federal Reserve a reason to maintain low interest rates because inflation remains below its target.
"The commodity price slump is a good thing for the American consumer," said Jack Ablin, who helps manage $66 billion as chief investment officer at BMO Private Bank in Chicago. "Having lower food and energy prices is a benefit. It puts more money in household wallets."
Wheat buyer General Mills Inc., maker of Cheerios cereal and Betty Crocker bake mixes, said in June that its cost of ingredients and energy will grow 3 percent in the 12 months that began in June, below its average of 5.25 percent in the previous four years. Orrville, Ohio-based J.M. Smucker said last month that cheaper peanuts and soybean oil helped boost profit in its fiscal first quarter.
"The global economy is likely not growing as fast as people predicted initially," said Jeffrey Sherman, a portfolio manager at Doubleline Capital in Los Angeles. "That's what the commodity complex is signaling, that the global growth environment is a lot slower than people thought."
