Cash and future markets agree: the global industrial slump has ended
May 20, 2024
Key Observations:
The year-on-year change in the CRB BLS Raw Industrials Cash Price Index has moved into positive territory for the first time since the end of June 2022. This iconic index measures U.S. price movements across thirteen* physical commodity markets. Since its introduction in 1952, the index has proven to be a useful barometer of broad changes in economic conditions, precisely because it is equal weighted and derived from cash market activity.
This signal supports our assessment that the global industrial economy has exited the bear market that began in June 2022 (On taking the under and the over, 7-Mar-2024). It also validates our view that a bullish regime began in December 2023 for the precious metals (Up, up, and away, 4-Dec-2023) and in February 2024 for the base metals (The Factory Switch Flips On, 3-Apr-2024).
Meanwhile, industrial commodity futures are also signaling that the economic tide has turned. The improvement is particularly notable in Europe. The prompt futures prices for EU carbon dioxide emission allowances slumped below €50 to make a three-year low in late February 2024. Since then, this price has rebounded by more than 46%, and the chart looks terrific on momentum.
Benefits: ANTO, IVN CN, COPX, XLI, XLB, XLE, HGN4, LPN4, JNN4, QSN4, HON4, NGV4
Source: Barchart, Bloomberg, Blacklight Research. * the thirteen components in this equal-weighted index (1967=100) are hides, tallow, copper scrap, lead scrap, steel scrap, zinc, tin, burlap, cotton, print cloth, wool tops, rosin, and rubber. Note: Barchart acquired the Commodity Research Bureau in 2001 and is the current calculator and publisher of this physical commodity price index. Separately, FTSE Russell, an LSEG business, produces the FTSE/CoreCommodity CRB® Indices, which are administered by Refinitiv Benchmark Services (UK) Limited. These are excess and total return indices calculated on price movements in nineteen commodity futures markets. Component selection by an oversight committee considers liquidity (which also determines weights in the index), economic significance, and other factors.
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