China Syndrome?

Much has been made of the link between the surge in commodity prices in recent years and the explosive growth in Chinese demand. The attached graph of that nation’s value-added industrial output versus the monthly closing price of oil and copper shows just how synchronized the relationship has become.

click for a larger chart


Chart courtesy of Michael Panzner

What's been said:

Discussions found on the web:
  1. spencer commented on Apr 27

    The CRB index of industrial commodity prices has always been the single best leading indicator of crude oil prices. Of course, this would support the argument that rising oil prices are just one way inflationary pressures show up and that there is nothing special about oil except it plays a much larger role in the economy then other commodies.

  2. John commented on Apr 27

    Which begs the question- if the U.S. economy rolls over and the consumer stops buying all those Chinese products at WMT (didn’t they just break to a 4 year low?) will we see a cyclical decline (within the secular bull market) in oil? If so, what level support?

    The stocks aren’t feeling well… Asian flu?

  3. DOR commented on Apr 27

    The chart makes the assumption that the data from China are as accurate as that from the US.

    Always a mistake.

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