Majority of economists mislead over commodity bubble: survey

WASHINGTON, May 8, 2008 (AFP) – A surge in food and energy prices is being driven by fundamental market conditions, rather than an investment bubble, according to a Wall Street Journal survey of economists published Thursday. Fifty-one percent of the respondents said demand from China and India was the prime factor in soaring energy prices, and 40 percent said demand was the chief contributor to rising food costs, the WSJ said on its website.

In the survey, tight supply was cited second most-often for spiraling prices by the 53 respondents. Twenty percent blamed supply problems for higher food prices and 15 percent for increasing energy prices.

Still, 11 percent see a potential bubble driven by speculation.

“Commodity markets have become a strange safe haven, with prices well out of line with underlying market fundamentals,” Diane Swonk of Mesirow Financial was quoted as saying.

The WSJ survey, conducted last Friday through Tuesday, found the economists, on average, expect the price of crude to fall to about 105 dollars a barrel by end-June from the current record-high levels above 120 dollars and to decrease to about 93 dollars by year-end.

Sixty percent of the respondents said the Federal Reserve is