RBA released its index of commodity prices estimates yesterday. The headline month on month average price increase to August was estimated to be ~2.7% in USD terms and ~1% in AUD terms due to a weaker USD.

The slight uptick in the overall index masks notable increases in spot iron ore and thermal/met coal (together accounting for a ~50.5% weighting in the overall index) along with modest increases in base metals, and counteracted by large falls in rural commodities.

If using export price movements as a measure, iron ore and coal together increased by ~7.3% in AUD terms, month on month. But when measured by the spot price (in our opinion a more efficient barometer of Chinese growth and steel demand), the increase was ~14% in AUD terms - quite a strong showing on top of the ~11% printed in July.

How sustainable will this 2 month uptrend be?

We will get more of a hint when the September numbers print in October.

Mike

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