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Fri12152017

Last updateSat, 29 Jul 2017 12am

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No more Dr Copper

Plotting the price of copper against a global composite purchasing managers' index shows a loosening correlation.  The price of copper has been a poor indicator of the global economy for many years, according to Julian Jessop, CapEco's Chief Global Economist.

The surge in prices between 2004 and 2008 did not signal a major acceleration in global growth.  Likewise, cooper prices have been in trend decline since 2011, and yet economic activity at the global level has held up relatively well!

Why?  Here are the possible explanation:

  1. If the countries' growth is from the services sector.
  2. New sources of supply, lower costs and structural shifts in demand due to substitution and new technologies.

It's true that copper still displays a pretty tight correlation to the Chinese manufacturing sector bus CapEco reckons the price is "at best, a coincident indicator of the current state of demand, rather than a reliable guide to the future".

Reference:

Financial Times, Jamie Chisholm, 2015-11-23, "Doctor Copper Loses Barometer Status"