Copper as an economic indicator


By Scott Bauer

In short

  • An increased demand for copper usually indicates a growing economy, just as a drop in demand for copper may suggest an economic downturn.
  • Copper prices are now down more than 25% since peaking at just over $5 in March 2022.

Due to its use in many industries, copper is considered a leading indicator of economic health. After all, it is used practically everywhere – in homes and factories, in electronics and in power generation. And in recent years, copper’s role in the growing production of electric vehicles has further boosted demand for the metal.

For this reason, when the demand for copper increases, it usually indicates a growing economy, while a decrease in demand for copper can portend an economic downturn to come.

Copper has had a bull run in recent years during the pandemic for several reasons:

  1. A record fiscal stimulus helped provide tailwinds for strong economic demand as COVID-19 lockdowns ended, driving manufacturing up. Specifically, China, which is the world’s largest buyer of copper, saw its economy recover rapidly and grow throughout 2020.
  2. There have been numerous disruptions in mining and refining that have led to a reduction in supply, resulting in historically low inventories almost everywhere in the world.
  3. The US dollar has weakened considerably during the pandemic. Copper and the US dollar have an inverse relationship as they are traded in US dollars.

Copper prices reached $4.80 in May 2021 and recently peaked at just over $5 in March 2022. These highs were last seen in February 2011.

But copper has fallen recently as interest rate hikes and fears of a looming global recession have dampened expectations that demand will hold up in the near term. As of August 24, 2022, the price of copper has fallen more than 25% from its peak in March. Since the resurgence of COVID in China, demand concerns have hit the market, far exceeding any lack of supply. Rising interest rates around the world have also hurt, as this has historically held back economic expansion. And just as the weakness of the US dollar helped lift copper prices in 2020 and 2021, the reverse is now true, with the recent rise in the value of the dollar creating major headwinds.


Although copper demand has had a direct correlation with economic activity, it has not been a leading indicator of stock market performance. Over the past 40 years, there has actually been an inverse correlation between copper prices and S&P 500 returns. Perhaps the most recognizable example of this inverse correlation occurred between the start of 2011 and the early 2016. During those five years, copper fell almost 60% and the S&P 500 nearly doubled over the next four years. Although this overall correlation is inverse, it is anything but stable over time.


Given current inflation fears, rising interest rates and the possibility of a global recession, economists and investors will continue to closely monitor the price of copper as an indicator of the health of the economy.

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Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.