Commodities decline on growth worries

12th May 2011 11:10

Worries over global economic growth have caused continuing declines in commodity prices.Crude prices continued sliding Thursday after the International Energy Agency (IEA) lowered its forecast for global oil demand. The Paris-based agency cut its estimate for daily consumption by 194,000 barrels over 2011 after almost no growth in March. The IEA says that recent surges in commodity prices are likely to crimp demand in the US over the crucial summer driving season. The report sent the price of a barrel of Brent crude down by more than 1%.Lower oil prices were evident on the FTSE 100, with airlines such as the budget carrier easyJet, which earlier this week said high fuel prices leave it cautious, bucking the downward trend. However, metals prices were also on the decline, hurting mining stocks such as Fresnillo, Vedanta Resrouces and Kazakhmys.Also dampening sentiment was China after its consumer inflation came in ahead of forecasts: despite falling from the 5.4% rise in March, the consumer price index (CPI) increased by 5.3% (year-on-year) in April, while analysts were expecting a 5.2% rise. "Even though the trend has been initially contained, CPI is still under rather big pressure due to the situation in the country and abroad," said Sheng Laiyun, a spokesman for the nation's National Bureau of Statistics. The figures increased speculation that the economy would attempt to tighten monetary policy - as slowing activity is met with rising prices - which could affect demand for commodities. ---RG