(Export Development Canada – Peter G. Hall)
May, 2010 was just a few days old when the world economy hit a troubling inflection point. Concerns about the viability of Southern European economies combined with slowing growth to sour recovery hopes. Pundits are now proclaiming modest growth in unison, but commodity markets must have the earplugs in. Prices should be falling, but instead they are going the other way. What’s going on?
Commodity prices generally line up well with the economic cycle. The CRB spot price index, a weighted average of all commodity prices, fell during the recessions of the early 1980s and the early 1990s, the global turbulence in 1997-98, the 2001 slowdown and most dramatically in the recent Great Recession. The world economy slowed abruptly in the second quarter of this year, and third-quarter growth weakened further. In stark contrast to this consistent historical record, today’s prices are high and pushing toward the early-2008 peak. Is this, as some believe, a new reality?
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