The COVID-19 recession brought to the fore some very unusual and puzzling patterns between different macroeconomic aggregates, with supply side bottlenecks and shortages, record consumer inflation and the unusual coexistence of an unusually tight labour market altogether with record labor slack. The COVID recession itself lasted only two months according to the NBER’s Business Cycle Dating Committee. The fiscal and monetary response to the pandemic has corrected some of its most dire human and economic consequences but it has also led to new imbalances and it has magnified some of the imbalances that existed prior to the pandemic. The combined impact of all these imbalances, direct and indirect effects of the pandemic on supply and demand have shaped a very peculiar COVID-19 related business cycle, giving rise to what one might call “the COVID-19 conundrum”.
Over the last few months, commodity prices have surged across the board. The S&P GSCI index and related subindexes have been soaring whether you look at Energy commodities, Grains and other Agricultural commodities, Industrial Metals or Precious Metals. While oil prices and the broader energy commodities basket have rebounded from their Covid-19 slump, the price surge has been particularly impressive for agricultural commodities and precious metals.