The future of commodity prices and the pandemic-driven global recession: Evidence from 150 years of data

Abstract

The pandemic-driven global recession has already triggered a rapid decline in global commodity prices, particularly of energy products. This is taking place on top of a downward trend in commodity prices that was already underway. Yet it remains unclear how long this decline will last given the uncertainty about the global recession. In this comment, we provide an overview of evidence using 150 years of data on commodity prices and global output. Commodity prices have experienced trends as well as four long-term cycles (“super cycles”) since the late 19th century, with the latter dependent on world demand. Although recent trends have been diverse, the two recent super cycles have been synchronized. The last one started at the turn of the century and had its peak in the early 2010s. Future trends would be determined by the weakness of global aggregate demand, changes in the global energy economy to mitigate climate change, and the weight of sub-Saharan Africa population on tropical commodities.