Monday, March 07, 2011

Food may eclipse oil as spending threat

Either one is troubling, a combination of both would prove devastating.
WASHINGTON (Reuters) - Food, not oil, may prove to be the bigger threat to global growth, with the pain falling disproportionately upon the developing economies that powered the latest economic recovery.

Oil market investors are pricing in only a small risk that Middle East unrest spreads to top oil producer Saudi Arabia -- an event that would instantly catapult oil to the top of the global economic risk list.

Assuming Saudi Arabia's oil flows unimpeded, the blow to global consumer spending looks relatively modest. Food prices, however, are expected to remain elevated for some time, which puts more pressure on household budgets.

"At the moment, the increase in food prices is much more of a concern," Thomas Helbling, an advisor in the International Monetary Fund's research department, told Reuters Insider.

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