Will inflation stoke up the dying commodities boom?

In 2008, the benchmark CRB commodities index slumped by 36%. But some analysts now think that aggressive fiscal and monetary policies could improve the outlook for raw materials in the second half of 2009 or early next year.

In 2008, commodities 'fell off a cliff', with the benchmark CRB index slumping by 36%, the worst drop since its inception in 1956. Early this year they tried to scramble back up, with oil rebounding from $34 a barrel to around $50, and nickel and zinc futures gaining around 30% before easing again over the past few days. The slide is unlikely to be over yet. The key issue for raw materials is that the synchronised global economic expansion that underpinned the bull run of the last few years "has morphed into a synchronised global recession", says the Australian Financial Review. With Europe, Japan and America all shrinking together, and growth in the developing world rapidly slowing, it's no wonder the World Bank recently warned that global GDP could contract for the first time since World War II. And as leading indicators continue to deteriorate, the prospect of a recovery is slipping "even further into the future", says Citigroup.

Base metals look vulnerable...

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