The supercycle is back. Raw material prices rose by nearly 20% in May, according to the s&p/Goldman Sachs Commodity Index, one of the biggest monthly increases on record. The surge has been widespread, with everything from copper to cotton moving higher. Meanwhile the Baltic Dry Index, an indicator of shipping activity, has risen more than sixfold from its December low.rnIt is not difficult to paint this rebound as a sign of economic recovery. The bullish story runs as follows. The collapse of Lehman Brothers was an enormous shock to global business. Firms reacted by cancelling orders and slashing inventories. That was why the numbers for industrial production looked so cataclysmic earlier this year. But the recession is not turning out to be as bad as executives feared. Companies are resuming production (the British arm of Honda is a case in point) and are building up their inventories once again. The rise in commodity prices is an early indicator of this improving sentiment.
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