Commodities, Copper and Baltic Index Suggest Global Economic Activity Is Returning

The Dow Jones-AIG Commodity Index (^DJC) is a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities (e.g. natural gas, live cattle, wheat, copper, silver, cotton, etc., see the full list and current weights here and see the chart above) and was launched on July 14th, 1998.

Blogging maven and fellow chartaholic Scott Grannis has been regularly graphing and reporting on commodity prices over the last six months, particularly copper, because he says that "Commodity prices are an excellent way of keeping tabs in real time on the progress of the global economy."

Here's a chart below of the Dow-Jones AIG Commodity Index back to 2007 (in semi-log format a la Scott), showing that the commodity price index reached a one-year high yesterday, closing at the highest level since October 14, 2008.

The one-year high for the commodity price index indicates that global commerce and economic activity are rebounding from the early 2009 lows, and that a global economic recovery is well under way, especially considering the other recent positive reports on global economic activity picking up (here and here). Even the Baltic Dry Index is showing some signs of life again, closing above 3,000 yesterday for the first time since early August.

Comments

[Dave Wrixon:]

I thought we all new that China was sucking in commodities partly due to the expansion of its internal economy and partly as a hedge against the probability of a dollar meltdown. Yes, globally things are getting back to normal because it is gradually being realized that the it is not a global problem. Not sure that quite gets the US out of the hole.

Oct 23 04:37 AM

[AndrewBaker:]

As I'm not a lover of buying expensive stock, which nearly all are right now, I've decided that commodities are the way forward at this time. Prices may be higher because Uncle Buck is out of favor or because future demand is expected to increase and in some cases shortages are predicted: and frankly I don't care which. Momentum trading commodities does me in these markets.

Oct 23 09:31 AM