Higher prices are causing consumers to hold back on spending, while slowing economic growth has ended with manufacturers ordering less industrial metals to make their products. The result is the worst monthly performance for commodities in 28 years in July.
The 10 percent plunge of the Reuters/Jefferies CRB Commodity Index of 19 commodities last month was the worst since March 1980, which was a recession year in the U.S. The index has fallen by 12 percent since July 2.
For the first time since it started being measured in 2005, China manufacturing has contracted, while the U.K. experienced its worst contraction in a decade during July. China is the largest consumer of industrial metals in the world.
Since the record attained on July 11 for crude oil, coming in at $147.27 a barrel, the commodity has fallen to $122.10 today in New York trading. That's attributed to higher prices slowing down demand.
"The growing prospect of demand destruction in the U.S., and potentially other parts of the world, combined with technical indicators that suggest it's time to sell, is keeping prices under pressure," said Christopher Bellew, senior broker at Bache Commodities Ltd. in London.
Leading a drop in metals prices were copper and aluminum, while in agricultural commodities corn, soybeans and rice all fell on the CBOT.
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