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The Commodity Super-Cycle Wasn't So Super

ByEd Yardeni
Published 01/13/2015, 12:10 AM
Updated 07/09/2023, 06:31 AM


CRB Raw Industrials Spot Price 1998-2014
Last year on numerous occasions, I argued that the commodity super-cycle wasn’t so super. It lasted roughly 10 years. It started when the CRB raw industrials spot price index (which does not include petroleum) troughed at 214 on November 5, 2001, coinciding with China joining the World Trade Organization on December 11 of that year. It rose 198% to peak at 638 on April 11, 2011. It dropped sharply that year and has been range-bound between approximately 500-550 since then. On Friday, it was down to 490, which may signal a breakdown.

Commodity producers expanded their capacity, expecting a 20- to 30-year super-cycle driven by ever-increasing demand from China. Instead, the Eurozone fell into a recession during 2011 and seems mired in structural stagnation, while China’s growth has slowed. Industrial production data through November show that output remains below the 2011 highs for France, Germany, Spain, and the UK.

During December, China’s PPI for manufacturing was down 2.5% y/y, the 32nd consecutive monthly decline. China’s PPI for raw materials was down 6.4% y/y, the weakest since October 2009. It was led by a 19.0% drop in ferrous metals prices. The heavy industry PPI was down 3.5%, while the light industry PPI was down 0.6%.

Today's Morning Briefing: Commodity and Wage Deflation. (1) Goldman’s oil forecast. (2) Are commodities an asset class? (3) Goldman’s commodity index is drowning in oil. (4) CRB raw industrials spot price index is on edge. (5) Global Growth Barometer indicating stormy weather. (6) More PPI deflation in China. (7) A real prince. (8) Saudi’s shale game. (9) Why did wages fall during December? (10) Slicing and dicing average hourly earnings. (11) Another curve ball for the Fed.

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China PPI: Raw Materials 1998-2014

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