Commodity prices plummet as U.S. economic growth slows

Gold, gas and cotton.

UPDATED INTERVIEW WITH NANCY MARSHALL GENZER

JEREMY HOBSON: In about a half hour we'll get the most important economic indicator of the month -- he April employment report from the labor department. It'll tell us how many jobs were created last month and what the new unemployment rate is. But commodities like oil and gold are already taking a tumble on concerns about the U.S. economy.

Let's get more on the story now from Marketplace's Nancy Marshall Genzer. She's with us live from Washington. Good morning.

NANCY MARSHALL GENZER: Good morning.

HOBSON: Nancy, first tell us why these commodities are dropping so fast.

GENZER: Traders are getting jittery. They're afraid the economic recovery is stalling out. They're selling commodities like cotton because they think people will be buying less. Oil prices have dropped because traders are worried that consumers will drive less. Plus, regulators in some fast growing economies like China are trying to slow down their economies down a bit, so they don't overheat.

HOBSON: And I have to say on the issue of oil prices dropping, Nancy -- the first thing I want to know is when will I see that drop at the gas pump?

GENZER: Exactly. I paid $3.98 the other day, but that probably sounds like a bargain to you. Prices are not going to go down right away Jeremy, unfortunately because retainers have to work through the gas they bought when prices were higher.And also, demand didn't fall much with the higher prices. So they don't have to lower prices quickly.

HOBSON: And Nancy -- it seems all this worry in the economy are related -- in some way -- to the jobs report we're about to get.

GENZER: That's right, but also we got some pretty soft economic news out this week. A couple of reports hinted that companies aren't hiring as much as we thought.

I talked to Tom Kloza about this. He's the Chief Oil Analyst at Opis.

TOM KLOZA: The worries are that high food and fuel prices were going to crimp economic growth. If you watch the business shows you'd think it was the boom-boom 80s again but people on the ground realized that wasn't the case.

And Jeremy as you mentioned, we'll get more solid number is less than an hour when today's jobs report comes out.

HOBSON: Marketplace's Nancy Marshall Genzer in Washington.


ORIGINAL INTERVIEW WITH CHRISTOPHER WERTH

JEREMY HOBSON: The government won't give us the highly anticipated April employment report for another couple of hours. But commodities traders are already writing the script, and it isn't pretty. The price of everything from gold to cotton is falling fast. And oil has dropped below $100 a barrel in U.S. trading for the first time in more than a month.

For more let's bring in reporter Christopher Werth in London. Good morning.

CHRISTOPHER WERTH: Good morning.

HOBSON: Well, first of all, why are we seeing this big drop in oil prices all of a sudden?

WERTH: For one thing, we've been learning this week that the U.S. economy is growing much slower than was hoped. That means Americans are going to be driving less, buying less gas. But there's also this psychological effect on where oil prices go. All commodity prices have been shooting up over the last couple of months because markets are worried about risk.

I spoke with Ronan Kavanagh at Petroleum Intelligence Weekly.

RONAN KAVANAGH: One element that may have been playing a psychological part in the equation was the killing of Osama bin Laden, which has kind of changed a certain mood in regards to kind of general risk.

So if the markets perceive that the world is a less risky place, traders may start to back off, lowering the price of a barrel of crude. We're seeing similar drops in gold, silver, and other commodities.

HOBSON: And on the oil drop -- are we going to be seeing this drop when it comes to the price of gas any time soon?

WERTH: Well, no, not immediately. Gas stations don't want to lower the price of gas unless this dip in oil prices is sustained. There could always be a bounce that sends prices back up. You know AAA says it typically takes a few weeks before a drop in the price of oil leads into a drop in gas prices.

HOBSON: Reporter Christopher Werth in London. Thanks Christopher.

WERTH: Hey thanks Jeremy.

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