An unusual divergence in commodities
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Started by metmike - June 24, 2018, 12:25 a.m.

is hiding signs of a global slowdown, economist says


https://www.cnbc.com/2018/06/22/a-divergence-in-commodities-is-hiding-signs-of-a-global-slowdown.html

 

     

"An unusual divergence is occurring in commodities markets is obscuring signs of a global slowdown, says Achuthan. The more closely watched exchange-traded commodities such as oil and copper have spiked on tighter supply from outlier events such as sharp drops in Venezuelan production."


Before this year, the exchange-traded and non-exchange-traded corners of the commodity space typically moved in unison. After splitting, Achuthan now sees that relationship reverting back to normal.

     

"We were looking for this divergence between these two to resolve itself by the exchange-traded commodities coming back down," he said. "We're getting a binary signal down and the global growth is slowing. That, I think, is becoming apparent especially if you look abroad."

     

Economic conditions overseas have been deteriorating, including in Europe's largest economy, Germany. Europe's economic locomotive, which accounts for more than a quarter of the European Union's economic activity, recently posted its slowest factory activity in 18 months.

     

"It's not that there's a recession or anything, but we're certainly slowing," added Achuthan. "When we look at really short-leading indicators including commodity inflation and PMIs and things like that, you're seeing those manufacturing related indicators all edging down. It's not over."

     

Outside of a bounce in the second quarter, U.S. economic growth is expected to expand this year and contract the next. Economists surveyed by FactSet forecast 2.8 percent growth in 2018 and 2.4 percent in 2019.

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