Copper Shines
We’ve been looking at various surveys and market valuation-based statistics that have a track record of being able to generally get the direction of the U.S. economy right. Now we’re going to take a look at a few indicators that get the direction of the global economy right. Toward the top of our list is copper prices.
When builders are getting ready to build and manufacturers are getting ready to manufacture, they buy commodities, or they buy commodity futures (which are a right to buy the commodity later at a price fixed now).
The chart below shows copper prices from the late ’80s to the end of last quarter. You can see the prices signaling the downturns of the past: the recession under George W. Bush; the Great Recession; the global slowdown associated with the European debt crisis from 2010 to 2015; the boom after the Trump tax cuts and the crash that came with the realization about the severity of the COVID crisis. And now we can see the rapid recovery.

All other things being equal, when there is more demand for copper the price goes up. “All other things being equal” means that, in our little thought experiment, we’re assuming no change in copper supply. For example, if there were massive strikes and political disruptions in the largest copper producing regions of the world, copper prices would tend to rise. But that wouldn’t be good news. It wouldn’t mean that the world was building more electronic components or more copper piping, it would mean that copper users were frightened about running out of supply.
That’s one probable reason why the peaks and troughs don’t always map well with global growth. All other things are not always equal. Copper prices can go up because of just plain old inflation, or down because of deflation. Or, as mentioned above, they can go up because of supply disruptions, or down because of surges in supply. If Elon Musk sent a rocket ship out and brought back a gigantic asteroid made out of copper and safely landed it in some deserted area, the price of copper would probably collapse, but it would not be because of bad news.
So we adjust for both inflation and for supply, so that we end up isolating the change in demand, which is a stand-in for expected growth, or at least growth in those industries which use copper. And then we compare that to the following year’s global growth rate. Here’s what that looks like:

Clearly there is a positive correlation — that’s what the upward-sloping line means. Also, the upward-sloping line visually looks pretty good. It doesn’t look like a force fit. Yes, if it were a perfect fit, then each real-world dot would line up perfectly along the mathematically created line of expected values. But no model is perfect. Models by definition are shrunken-down representations of reality.
This model is representing two things to us: 1. Copper buyers have gotten much more hopeful in the last year, and 2. They are forecasting a global recovery. Perhaps not a boom, but a recovery. All in all, copper seems to be shining again.
Originally published on Townhall Finance.
Jerry Bowyer is a Forbes contributor, contributing editor of AffluentInvestor.com, and Senior Fellow in Business Economics at The Center for Cultural Leadership.
Jerry has compiled an impressive record as a leading thinker in finance and economics. He worked as an auditor and a tax consultant with Arthur Anderson, as Vice President of the Beechwood Company which is the family office associated with Federated Investors, and has consulted in various privatization efforts for Allegheny County, Pennsylvania. He founded the influential economic think tank, the Allegheny Institute, and has lectured extensively at universities, businesses and civic groups.
Jerry has been a member of three investment committees, among which is Benchmark Financial, Pittsburgh’s largest financial services firm. Jerry had been a regular commentator on Fox Business News and Fox News. He was formerly a CNBC Contributor, has guest-hosted “The Kudlow Report”, and has written for CNBC.com, National Review Online, and The Wall Street Journal, as well as many other publications. He is the author of The Bush Boom and more recently The Free Market Capitalist’s Survival Guide, published by HarperCollins. Jerry is the President of Bowyer Research.
Jerry consulted extensively with the Bush White House on matters pertaining to the recent economic crisis. He has been quoted in the New York Times, The Wall Street Journal, Forbes Magazine, The International Herald Tribune and various local newspapers. He has been a contributing editor of National Review Online, The New York Sun and Townhall Magazine. Jerry has hosted daily radio and TV programs and was one of the founding members of WQED’s On-Q Friday Roundtable. He has guest-hosted the Bill Bennett radio program as well as radio programs in Chicago, Dallas and Los Angeles.
Jerry is the former host of WorldView, a nationally syndicated Sunday-morning political talk show created on the model of Meet The Press. On WorldView, Jerry interviewed distinguished guests including the Vice President, Treasury Secretary, HUD Secretary, former Secretary of Sate Condoleezza Rice, former Presidential Advisor Carl Rove, former Attorney General Edwin Meese and publisher Steve Forbes.
Jerry has taught social ethics at Ottawa Theological Hall, public policy at Saint Vincent’s College, and guest lectured at Carnegie Mellon’s graduate Heinz School of Public Policy. In 1997 Jerry gave the commencement address at his alma mater, Robert Morris University. He was the youngest speaker in the history of the school, and the school received more requests for transcripts of Jerry’s speech than at any other time in its 120-year history.
Jerry lives in Pennsylvania with his wife, Susan, and the youngest three of their seven children.
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