Commodity prices and GDP growth

This paper explores the extent to which commodity prices can predict GDP growth rates of various countries using indices of 27 commonly traded commodity futures. Commodity returns can strongly predict the next quarter's GDP growth, while the basis shows a reasonable level of predictive power. Overall, commodity prices can be considered a leading indicator of economic growth; increasing commodity prices and basis values indicate a stronger future economy. •This paper explores how the commodity market can predict GDP growth for countries worldwide, rather than a few specific countries or regions.•Commodity returns significantly predict the next quarter’s GDP growth, and thus can be considered as leading indicators of economic growth.