Commodities price slump prompts growth concerns

BEIJING, May 14 (Xinhua): Big drops in international commodities prices have added to concerns over the uncertainty of global economic recovery amid slowing consumer spending in the US and monetary tightening policies aimed at cooling inflation in China. Crude oil prices on the New York Mercantile Exchange (NYMEX) edged up slightly Thursday, but remained below 100 US dollars per barrel. Prices on light, sweet crude for June delivery fell more than 5 per cent to settle at 98.21 US dollars per barrel Wednesday Other commodities, like silver, slid by more than 7 per cent. The NYMEX gold futures edged down by 1 per cent to 1,501.4 US dollars per ounce. Crude oil prices dove after the US Department of Energy released a report on energy reserves Wednesday showing falling demand for an increasing crude stock. Meanwhile, overall US consumer spending growth slowed in April. Jim O' Neill, chairman of Goldman Sachs Asset Management, said the price declines were within expectations because commodities prices had risen too fast during the past two years. O' Neill added that price readjustment in the global commodities market will continue for a while along with a cooling in the quick economic growth momentum in China, the world's second largest economy. According to data released by China's statistics authority Wednesday, industrial value-added output rose 13.4 per cent year- on-year in April, but the growth rate dropped 1.4 per centage points from March. Meanwhile, inflation rose 5.3 per cent from a year ago, far exceeding the government's target of keeping the figure below 4 per cent for the full year. In the latest move to battle inflation, China's central bank announced Thursday that it will raise the reserve requirement ratio (RRR) of the country's lenders by 50 basis points, effective May 18. The fifth such hike of this year will lift the RRR for China's large financial institutions to a record high of 21 per cent. The central bank has also raised benchmark interest rates four times since last October to fight rising prices. The US unemployment rate remains high, hovering around nine per cent, and investors in newly emerging economies such as China and India are worried that inflation and monetary tightening could hamper growth, said Wang Hongying, vice president of the China Futures Research Institute. If debt problems in Greece and other Euro-zone countries are not solved immediately, the prospect for global economic recovery will be gloomy, Wang added. Some analysts say that as global inflation intensifies and effective demand from newly emerging economies moderates, countries could further tighten monetary policies, ending the bullish run in the commodities market along with a recently rising dollar. But some analysts argue that the strong upward trend in global economic recovery and a weaker dollar in the long run have not fundamentally changed, as industrialization and urbanization in countries such as China and India will further boost commodities prices.