
Oil price slide indicates growing concern about a slower-China syndrome
Abstracted from The Age
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While the 14% fall in oil prices in July may generate relief for some, the economic factors leading to the drop will alarm many. If the decline is being driven by hedge funds and short term investors affecting the speculative price overlay, the result will be good for Australia and its inflation issues. However, if a slowdown in global demand is behind the falling oil price, there is much more to be concerned about. Demand from wealthy countries has fallen 0.5% annually since 2005, and is expected to decrease by 0.9% in 2008. Developing economies increased demand by 3.8% in 2007. China appears to be easing off, as the Chinese Government is attempting to curb economic growth, which currently sits a 10%. A slowdown to below 9% would be catastrophic for prices in Australia's oil and resources sectors
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