In this brief note, we present our chart of the week, which shows the relationship between copper prices and Chinese credit dynamics.
Source: Bloomberg
As the chart above suggests, there is a clear positive co-movement between the year-on-year change in the LME copper price and the Chinese credit impulse, which is the second derivative of credit.
Our work shows that the Chinese credit impulse is not only a reliable leading indicator of economic activity, but also of copper consumption and copper prices.
What is exactly the credit impulse?
The credit impulse can be defined by