IMF Can’t Say the Commodities Markets Are Complacent

The International Monetary Fund on Monday kept its forecast for global economic growth this year and next unchanged at 3.9 percent but said financial markets seem complacent to the mounting risks of escalating tensions over trade. The IMF economists have apparently neglected to look at the commodities market.

While global equities and bonds have largely been range-bound the last two months, the market for raw materials has, in the parlance of traders, fallen out of bed. The Bloomberg Commodity Index of 26 raw materials ranging from oil to coffee to zinc has tumbled 9.53 percent from its year-to-date high on May 23, falling to its lowest since August. Last week’s 2.76 percent drop was the biggest since early February. It would be easy to dismiss the declines as nothing more than computer algorithms gone wild, as some have suggested, except that they coincide with some disturbing data points suggesting corporate executives in the U.S. are becoming nervous while the economy is going gangbusters. First, the University of Michigan’s monthly consumer confidence survey on Friday showed that the portion of its poll asking respondents about their outlook for business conditions in a year tumbled to its lowest since April 2016. On Monday, the New York Federal Reserve’s monthly Empire Manufacturing index showed that the plans by companies in the New York area to increase capital expenditures in the next six months fell to its lowest since August.