5 Commodity ETFs To Watch When PPI Inflation Data Drops Wednesday

Author: Piero Cingari | June 13, 2023 02:16pm

Producer Price Index (PPI) inflation data for May, to be released on Wednesday, June 14, will set the stage for the highly anticipated Federal Reserve meeting where interest rates will be determined.

The market’s expectations of the Fed’s rate hikes coming to an end were solidified after Tuesday’s CPI report revealed a lower-than-expected decline in consumer inflation.

The upcoming producer inflation data could provide additional evidence of a disinflationary trend, potentially swaying Fed members to reconsider the need for future interest rate increases.

Producer Price Inflation Preview: What Do Economists Expect?

• Economists forecast that producer inflation in the U.S. could decrease to as low as 1.5% in May, down from April’s 2.3%, marking the lowest level since January 2021. This would extend the streak of 12 consecutive declines in producer price inflation.
• Producer prices are also projected to fall significantly below their 10-year average of 2.7%.
• Monthly estimates show a 0.1% reduction in producer prices, the second negative reading in 2023.
• Core PPI, excluding energy and food, is predicted to fall from 3.2% in April to 2.9% in May, its lowest level since March 2021. The monthly core PPI is expected to stay unchanged at 0.2%.
• Food (down 0.5%) and transportation and warehousing (down 1.7%) subindices experienced monthly contractions in April, with the latter seeing four consecutive months of decrease.

Chart: PPI Inflation Is Falling Off A Cliff

Read Now: Energy-Driven CPI Drop In May Contrasts With Persistent Core CPI: 5 Economists Speculate On Fed’s Next Move

Commodity Prices Tumbled in May, Putting Additional Downside Pressure To PPI: 5 Commodity ETFs To Watch

Global commodities prices fell across the board in May, as COVID-19-related supply chain disruption further vanished and China’s economic recovery moved slower than expected.

The iShares S&P GSCI Commodity-Indexed Trust (NYSE:GSG), an exchange-traded fund that provides broad exposure to a diversified basket of commodities, including energy, agriculture, industrial metals and precious metals, fell nearly 4% in May. GSG is 6% down year-to-date.

The Invesco DB Agriculture Fund (NYSE:DBA), an exchange-traded fund that invests in a basket of agricultural commodities such as corn, wheat, soybeans and sugar, eased 2.3% last month. DBA is 7% higher year-to-date

The United States Oil Fund (NYSE:USO), the largest exchange-traded fund investing in contracts on WTI crude oil and other oil-related derivatives, plummeted more than 10% last month. USO is 8.3% lower year to date.

The Invesco DB Base Metals Fund (NYSE:DBB), an exchange-traded fund that invests in a basket of industrial metals like copper, zinc, nickel, tin and aluminum, tumbled 7% last month. DBB is 5.9% weaker year to date.

The Aberdeen Physical Precious Metals Basket Shares ETF (NYSE:GLTR), which provides investors with exposure to a basket of precious metals, also fell 3.5% last month. GLTR is 0.9% up year-to-date.

Other than physical commodities, sharp declines in freight costs were also observed in May, with the Baltic Dry Index, widely regarded as the most popular global shipping costs index, plummeting 39%.

ETF Name	Ticker	Commodity Type	% Change in May	% Change Year to Date
iShares S&P GSCI Commodity-Indexed Trust	GSG	Broad basket of commodities	-4.0%	-6.0%
Invesco DB Agriculture Fund	DBA	Agricultural commodities	-2.3%	+7.0%
United States Oil Fund	USO	WTI crude oil and derivatives	-10.0%	-8.3%
Invesco DB Base Metals Fund	DBB	Industrial metals	-7.0%	-5.9%
Aberdeen Physical Precious Metals Basket Shares ETF	GLTR	Basket of precious metals	-3.5%	+0.9%

Chart: Commodity ETFs’ Year-to-Date Performance

Photo: Shutterstock

Posted In: DBA DBB GLTR GSG USO