Predictions of a slowdown in global industrial activity are ringing true, and the proof is in currency markets, an economic forecaster told CNBC's Trading Nation.
Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, said the decline in the growth of prices for industrial materials now underway is a trend he had forecast during the summer, the network reported.
“We made that earlier global Industrial downturn call, and that meant that you were going to see this slowdown in industrial materials price inflation, industrial commodity price inflation, and the top line of the chart shows that,” Achuthan said. "That weakness in industrial materials inflation, commodity price inflation, is also negative for commodity currencies like the Canadian dollar or the Australian dollar because those are commodity-exporting countries and they rely more on commodity exports.”
The Canadian dollar is affected by oil prices, and Australian currency has a strong correlation with oil and gold, he said.
“A lot of people are excited about the run-up in commodities," Achuthan said. "We’re saying directionally you got to look the other way. It has knock-on effects to commodity currencies vis-à-vis the dollar. And that has knock-on effects I think for other asset classes — what’s going on with some of those currencies can obviously impact commodities themselves, bonds, even stocks.”
The Economic Cycle Research Institute's industrial materials price index has slowed to its lowest growth in approximately a year after increasing dramatically from mid-2020 to early 2021, CNBC said.