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STEVE INSKEEP, HOST:

Now let's report on the drop in commodity prices. Commodities are basic goods sold at high volumes. One huge commodity is oil. And most of us have seen the result of oil price decline since gas prices have also plunged - good for drivers. But prices of commodities are falling too, and that may tell us something about the broader economy. David Wessel is on the line. He's director of the Hutchins Center at the Brookings Institution and a contributing correspondent to the Wall Street Journal. David, good morning.

DAVID WESSEL: Good morning.

INSKEEP: Does something seem out of the ordinary here?

WESSEL: Absolutely. Commodity prices rose pretty steadily from the late '90s until the financial crisis in 2008, in part because there was so much demand from China and other really booming emerging markets. Prices turned around five years ago. An index that Bloomberg compiles that tracks all sorts of commodity prices from oil to cotton to cattle is 50 percent lower than it was five years ago. But what's really unusual is the speed of the decline in the past few months. The price of copper has fallen by 25 percent in the last year. And here's just one amazing example. Two years ago, you could buy, if you wanted one, a barrel of high-sulfur North Dakota crude oil for about $48 a barrel - a year ago, $13.50 a barrel. Last week, one firm said it would pay customers 50 cents a barrel to take the stuff away.

INSKEEP: Wow. So I'm just thinking about this - basic economic supply and demand. I'm thinking if the economy around the world is growing, the commodity prices generally ought to go up. So what's it mean that they're dropping so fast?

WESSEL: Well, they always go up and down. When they go up, producers expand supply and overdo it. Then they go down, and then they come to their senses and prices go up again. But the worry now is that there's something more than supply going on - that it's a sign that industrial demand for energy, minerals, other commodities is waning. The global economy may be slowing more than had been anticipated. And that's particularly worrisome because we're at a time when governments have so much debt, they can't do much to fight recession if we get another one. And central banks, like the Federal Reserve, have rates so close to zero that there's not much more they can do.

INSKEEP: You know, I'm wondering how big a role China plays here. This is an economy that not only is in trouble, but that's in transition - that was trying to keep itself out of the Great Recession with massive, massive investments. And that's changing now.

WESSEL: Right. One huge worry in the world economy's that China is so big, when it slows a little bit, everybody else gets affected. So China is making a transition from an industrial to a service economy. That means less demand for commodities. And the pace of growth is slowing there. They just reported the pace of growth in 2015 was the slowest in 25 years. So that reduces demand for stuff from places like Australia and Africa and Canada. So the whole world is feeling that slow-down.

INSKEEP: Given all of this, though, can American consumers at least enjoy the low prices for a while?

WESSEL: Well, I don't know what's going to happen with commodity prices. Sometimes when something falls a lot, it then - the markets change their mind and it goes up. But for now, if you're working in the oil industry or mining or agriculture, things are just bad. But the U.S. as a whole is more of a commodity buyer than a seller, so low prices are a plus, as long as they don't fall so fast and so far that they trigger some big financial problems. Like, we've seen some banks say that they're worried if oil prices keep falling, they're going to have a lot of bad loans.

INSKEEP: A reminder that so much is it interdependent from David Wessel of the Brookings Institution and Wall Street Journal. David, thanks as always.

WESSEL: You're welcome. Transcript provided by NPR, Copyright NPR.

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