Saturday, October 17, 2009

Yearly Commodity Price Change Turns Positive

Three (one only barely so, though) out of four commodity price indexes listed on the Bloomberg News web page is now higher than a year ago. Early this year, these indexes posted 30 to 40% yearly declines. Most of this recovery is simply a base effect as more and more of the brutal commodity price drop between July and December 2008 is removed from the comparison (Commodity prices are still significantly below the July 2008 peak levels), but commodity prices have in fact risen quite a lot from the lows of December 2008, with for example oil being more than twice as expensive in U.S. dollars as in December 2008.

This will be followed by a similar increase in the yearly rate of consumer price change, which I discussed here.

The stagnant money supply growth in the most recent months has so far not been able to stop the commodity price rally, in part because of a drop in money demand and also because of a big increase in demand for commodities outside America, particularly in China


Blogger Celal Birader said...


Do you reckon the drop in the money demand will keep the stock market rallying ?


3:22 PM  
Blogger stefankarlsson said...

It could do so, but given the other factors that are likely to work against a continued rally, I don't think so. Especially since money demand largely reflects risk aversion.

9:42 PM  

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