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China’s Economy Is Rebounding Fast! What Does That Mean For Commodity Prices?

By:
Phil Carr
Published: Mar 3, 2023, 14:52 GMT+00:00

The Chinese economy is rebounding again, much faster and stronger than most expected.

Gold, FX Empire

In this article:

Chinese Economic Activity Is a Massive Game Changer

While there is no denying that a revival of the world’s second largest economy and its biggest consumer of Commodities is set to provide a welcome boost to global growth – offsetting weakness in Europe and the United States. However, unlike in 2009, when China’s four-trillion-yuan stimulus helped kick-start a recovery from the Lehman’s collapse – in 2023 there’s a catch.

And that’s a boost to inflation at exactly the moment the Federal Reserve and its global central-banking peers race to tame the biggest price spikes seen in four decades.

Data released this week, showed China’s manufacturing activity expanded at the fastest pace in more than a decade in February. China’s manufacturing PMI smashed records – surging to 52.6 from 50.1 in January – the highest reading since April 2012. A reading above 50 indicates expansion, while a reading below 50 reflects contraction.

Elsewhere, the official National Bureau of Statistics Non-Manufacturing PMI – a measure of economic activity in the service sector – soared to 56.3 in February from 54.4 a month earlier. That’s the second consecutive increase, since China reopened its economy and the highest reading since March 2021.

As savvy traders very well know – an increase in Chinese economic activity is a massive game changer – as renewed demand for every possible Commodity imaginable from the metals, energies to agriculture – could inevitably led to another global supply-side shock.

Impact On Commodities

The markets immediately reacted to the bullish Chinese data with a long-list of Commodities from Aluminium, Copper, Palladium, Platinum, Gold, Silver, Zinc, Crude Oil to Natural Gas prices skyrocketing to multi-month highs – with many notching up spectacular double digit gains.

Since the beginning of this year, a growing chorus of leading Wall Street banks from Goldman Sachs, JPMorgan to Bank of America have repeatedly signalled that “China’s Come Back and Re-Accelerating Inflation” will be two of the biggest macro themes driving the markets in 2023 and paving a path for Commodity prices to outperform every other asset class out there for a third consecutive year running!

Commodity Price Forecast for March 3, 2023

That’s welcoming news for the Commodity bulls, but painful for anyone sitting on the sidelines, who must now decide how much FOMO they can handle.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

About the Author

Phil Carrcontributor

Phil Carr is co-founder and the Head of Trading at The Gold & Silver Club, an international Commodities Trading, Research and Data-Intelligence firm.

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