Headwinds... September 27th, 2019 by John Gross

That’s what our economy seems to be encountering now.

Consumer spending, one of the key drivers contributing to economic growth slowed to just +0.1% during August from July, while orders for durable goods, excluding defense spending fell 0.6%.

Earlier this month, the Institute For Supply Management reported that their Manufacturing Index fell below the critical 50 level during August, coming in at 49.1, and representing the first negative reading in three years.

The attached chart in this week’s missive illustrates the relationship between the price of copper on Comex, and the ISM Manufacturing Index.

You don’t need us to tell you it is flashing a warning signal.

Going a step further, our friends at the International Copper Study Group, report that global consumption of refined copper fell 87,000 metric tonnes, or 0.7% during the first six months of 2019 to 11.960 million metric tonnes, from 12.047 mmt last year.

Production of refined was also lower, with output declining 131,000 mt, or 1.1% to 11.740 mmt from 11.871 mmt last year.

On the numbers, the global copper market posted a deficit of 220,000 mt during the first half, as compared to a 177,000 mt shortfall in the comparable 2018 period.

Typically, one would expect a deficit in copper, along with already low inventories to suggest the potential of higher prices, but we are a far cry from anything being considered typical these days.

Trade issues continue taking their toll on the global economy, and now a growing political upheaval in Washington threatens to do more damage.

When will it end?

Regards,
John

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View Charts (PDF)

View Copper vs ISM (PDF)

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