Does a Top in Reuters CRB index Signal a Global economic slowdown?
Over the past few months, the Reuters Commodity index has suffered a series of body blows from 20 different central banks, but does its latest 5% decline signal a global economic downturn, or just the unwinding of over-extended speculative positions? Right now, the outlook is mixed. The Japanese and US economies shifted into lower gears in Q2, but China expanded 11.3%, its fastest in a decade, and the Euro zone economy grew at a 2.4% annual rate, its best in six years. Furthermore, the recent round of global rate hikes that have capped the Reuters CRB are deceiving, because global monetary conditions still remain super-easy. In China for instance, the M2 money supply is 18.4% higher, Indias M3 is 19.1% higher, Koreas M2 is 9.2% higher, the UKs M4 is 14.1% higher, the Euro zones M3 is 8.5% higher, and South Africas M3 is 23.2% higher from a year ago. The European Central Bank targets its repo rate at 3%, far below Germanys 6% producer inflation rate, which in turn, encourages speculatio
