Analysts See Roaring Bear in Commodity ETFs

| About: iPath DJ-UBS (JJC)

Commodities and commodity ETFs are in their biggest slump since Lehman Brothers collapsed way back in late 2008. Analysts say that this slumping demand is sending a markedly bearish signal.

Wall Street forecasts for accelerating economic growth and higher prices for everything from copper to crude oil are being undermined by the largest slump in commodity prices since Lehman Brothers fell into the abyss.

Millie Munshi and Elizabeth Campbell for Reuters reports that the Journal of Commerce Industrial Price Commodity Smoothed Price Index that tracks the growth rate of steel, cattle hides, tallow and burlap plunged 57% in May. Reasons the index plunged stem from the October 2008 lows as Europe’s debt crisis widened and China’s steps to curb what some fear is runaway growth.

Other points made in the article include:

  • Copper had its biggest monthly slide since January; iPath DJ-UBS Copper TR ETN (NYSEARCA:JJC) fell 8.6% in May
  • Inflation is practically non-existent, with consumer prices dropping last month
  • A slowdown in Europe could dent demand for Chinese exports, which means China may be buying less soon

The index is eyed more closely because it’s viewed as more clearly reflecting supply and demand fundamentals. That’s because half of the items it tracks don’t trade on exchanges used by speculators.