Chart of the Week - Another Headwind for Commodities

Callum Thomas

Topdown Charts

China Property vs Commodities: China in general, but especially its property sector, has been a major driver of commodity prices over the past couple decades. There has recently been a brief exception to that, but things are starting to change again.

The Chinese property sector directly influences demand for industrial metals, and indirectly plays a role in general commodity demand in that the path of property prices has historically been the major driver of monetary policy decisions in China, and hence the path of China’s economy.

While the correlation in the chart below (between property prices and commodity prices) broke down somewhat in the wake of the pandemic (due to pandemic-driven supply shocks and global stimulus-driven demand shocks), it appears to be re-coupling on the way down.

China’s property market downturn is intensifying, with prices declining 10 straight months in a row …and that comes just as global growth is starting to slip (and as some initial supply response has started to come online for commodities).

Hence, I would add this to my existing stock of charts and evidence for the commodity bear case (and hence the emerging case for disinflation).

Key point: The China property downturn adds to downside risk for commodities.


NOTE: this post first appeared on our NEW Substack: (VIEW LINK)


Best regards,

Callum Thomas

Head of Research and Founder of Topdown Charts


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Callum Thomas
Head of Research
Topdown Charts

Callum is Head of Research at Topdown Charts. Topdown Charts is a chart-driven macro research house covering global Asset Allocation and Economics.

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