Economic data usually provide a clearer view in retrospect than at the time the data points occurred. Partly that is simply due to the fact that many economic data series are not available for one to three months after their occurrence. Data must be obtained, cumulated, calculated, updated, revised and published, and this takes a lot of time for large series such as GDP (Gross Domestic Product), and others, in all its varieties and state local subsectors. Thus we are often looking at data series which are from one week old to three months old. Market data and some economic series--unemployment benefits claims-- are instantaneous to one week old. It is only when all data from three months ago and earlier are examined that we can get a clearer picture.
Market data that can give us early clues, as well as long term clues, include nominal (actual) and real (inflation-adjusted)interest rates and the prices of economically sensitive commodities.* Nominal and real interest rates fall when economic conditions are weaker and rise when economic conditions are stronger. Short term rates, such as the 91 day US T-Bill, are strongly influenced by but not set by the Federal Reserve. they also reflect current economic demand Longer term rates such as the 20-30 year US T-Bond rate largely reflect long term demand.
Three widely used commodities in most sectors of the economy are crude petroleum, copper, and aluminum. They are used in many consumer products from homes and autos to food packaging and pharmaceuticals. And of course they are primary industrial commodities for a wide range of products and services.
http://www.martincapital.com/chart-pgs/Ch_comod.htm
Important Commodities
demonstrates that copper and aluminum made their initial price tops in the second quarter of 2006, and cash copper never went higher although it made secondary tops in 2008. Copper is often called the commodity with a PhD. The copper top in 2006 was an early warning that economic expansion was or soon would be slowing.
Much of the discussion and analysis from then to today was on gold and crude petroleum oil which made lows in later 2006 and accelerated their climbs into early to mid 2008. Debate raged and still does on the causes for gold's and oil's amazing races: US dollar weakness, peak oil and gold world production exhaustion, or rampant speculation. Regardless of cause, the effect of gold and oil spikes was to add a burden to economic production and confirm the copper and aluminum tops of 2006.
CPI, CPI Core & PCE Core Deflator shows that twelve month rates of change for the various measures of CPI (Consumer Price Inflation) also topped from late 2005 to the third quarter of 2006, and only basic CPI made a modestly higher rate of change in the summer of 2008.
http://www.martincapital.com/chart-pgs/Ch_infl2.htm
In my own work I correctly called the 2006 tops and corrections in commodities, and I anticipated but didn't "nail" the 2008 tops and "vacation from inflation". This was based largely on "Dr.
