On-Money

Despite a reduced global growth forecast of 2.7% and slackening demand in commodities such as oil,  metals and agriculture, the developing world particularly China still has growing demand. The recession should be seen as cyclical with underlying growth reduced and continuing into 2009 but structural demand is still present albeit somewhat quiescent at present.

In the last five years 30% of crude oil demand growth and 60% of copper demand growth has come from just one country: China. Compared to the USA in the same period, where demand has been declining in copper and almost unchanged in crude oil.  Inflationary pressures had begun to tell on China so their easing off fir a short time offers some respite.

Reduced oil prices down from the peak of $140/barrel in July 08 are also reducing the incentive to find new supplies or bring more expensive oil supplies online.  However demand will not stay depressed forever and there will be a long term need to increase oil supply.

Popularity: 76% [?]

Charles Bean, the Bank of England’s deputy governor warned that the downturn was as bad as in the 1970s and that everytime things looked up as if they were going to improve, a setback occurred. At Christmas 2007 he said that he had thought that things were past the worst but since then things had deteriorated.

He predicts that if the oil prices stabilised, along with credit markets then growth should pick up and inflation start to fall. And he suggested that the current UK standstill in growth was only temporary.

Popularity: 73% [?]