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Copper's View of the Recovery: No Real Growth This Year

Oct 28, 2009 - 5:14 PM EDT

Copper is considered a bellwether metal, so what is it telling us about where we're headed and what can it tell us about where we've been?

With the latter I'm thinking back before the crash. Copper consumption has been falling all decade in the USA. About two weeks ago, the International Copper Study Group (ICSG) forecast consumption in the USA, Europe and Japan to be down approximately 17% this year. While a decline would be expected by everyone this year, it is actually only amplifying an 8-year trend as we can see in the chart below.

If copper is a bellwether metal, and consumption has been falling in the USA the entire decade, how can that be? One explanation is that GDP growth, using the official numbers, has been illusory. If we were to use the GDP numbers with imaginary non-cash items like imputations and hedonics stripped out, we see that GDP growth has been negative for most of the decade. The chart below from ShadowStats.com show real GDP over the last 20 years.

So Dr. Copper is reflecting the real economy and where we've been. How about the future? If you were to focus solely on price charts, things would look rosy, but this would be to ignore the effect of a weak dollar and speculative money flowing into metals markets. In the real economy the trend doesn't look good.

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Source: Seeking Alpha (Oct 28, 2009 - 5:14 PM EDT)