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Impressive signs of economic strength




It's said that "Dr. Copper" is the commodity that is best at diagnosing the health of the economy. If that's true, then the global economy is really humming along, since copper prices are now hitting new, all-time highs.

The CRB spot index measures the price of a collection of very basic, non-energy industrial commodities. It too is at a new all-time high, suggesting that global manufacturing activity is moving forward in robust fashion. Most of the commodities in this index do not have associated futures contracts, so speculative hoarding is not liable to be a distorting factor.


The chart above is the Chicago Purchasing Manager's Index, and it has reached a 22-year high; the employment component of the same index has reached a new post-recession high. Moreover, the December Milwaukee PMI released today rose much more than expected.


The chart above shows the average price of regular gasoline according to the AAA survey, and it has reached a new, post-recession high.


The Korean stock market (KOSPI) is within inches of a new all-time high (the all-time intra-day high was 2085 in Nov. '07).


The chart above shows Commercial & Industrial Loans, a good measure of bank lending to small and medium-sized businesses. Loans have stopped declining and are now rising, a sign that banks have eased their lending standards and/or businesses are once again seeking to borrow more. In either case, that bodes well for future economic growth.

Some of the action in the above charts may be due to accommodative monetary policy and rising inflation pressures, but it's equally likely that they reflect improving economic activity. There are certainly pockets of weakness left, particularly in the housing market, but it's hard to ignore the growing list of signs of strength.

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