Those pesky economists are always blaming "market forces" for everything.
Take $120 oil, rationed rice, or any of the other headline-grabbing commodities whose prices have spiked this year.
The Wall Street Journal's monthly survey of professional prognosticators says fundamental market conditions rather than nefarious speculators are behind the run-up, and they're blaming the usual suspects.
From the survey:
Fifty-one percent of the respondents said demand from China and India was the prime factor in soaring energy prices, and 40% said demand was the chief contributor to rising food costs. Constrained supply was cited second most-often; 20% blamed supply problems for higher food prices and 15% for increasing energy prices.
Still, 11 percent did say prices are soaring amid the creation of a speculative bubble. In some ways if that was the majority opinion, it would be a reason to cheer. Speculators driving markets to unsustainable levels would probably mean a bust was on the horizon, a frightening thought for commodity investors but better news for consumers (not to mention millions of people in poor nations facing food shortages). Instead, look for a prolonged bout of higher prices.
Other interesting tidbits from the report:
- Sixty percent of economists say the Fed is concerned enough about inflation. They expect interest rates to stay on hold at 2 percent for the rest of the year.
- The credit crisis is still a crisis. Just 36 percent thought it was mostly over, and 62 percent said we're only at the halfway point of the crunch.
- Oil is expected to fall back by the end of next month to around $105 a barrel, and economists expect it to cool to $93 by year's end.
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Pat T of MA 1:32PM May 30, 2008