An End of a Commodities Boom?

Chart of the Week for September 15-21, 2006

In the past five years, investors have seen a strong commodities market. Prices ranging from sugar to crude oil were all driven up by purchases from manufacturers, investors and speculators. Analysts cite predictions of supply shortages and increased production costs, partly from high energy prices, as possible causes. The above chart shows the movement of the Dow Jones AIG Commodities Index, which tracks 19 different commodities, since September 2003.

The index peaked at 187 in May 2006 and has declined over the last few months because investors worry the slowing growth of the world economy will reduce demand for raw materials and energy. Although some analysts are still bullish on commodities, the decline in prices at least eases concerns that inflation driven by commodities will further slow economic growth in the economy as a whole.

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