Economists have revised down their expectations for global growth following a further plunge in the price of copper.
The price of the metal fell below $5,000 (£3,189) a tonne last week as more disappointing Chinese economic data increased worries about the outlook for resources.
The metal fell to $4,989 a tonne, the lowest level since the summer of 2009.
This concerned economists, as like oil, copper is a key indicator of the world economy thanks to its role as a fundamental infrastructure component through its use in electric cables.
Luca Paolini, chief economist at Pictet Asset Management said: “I think the copper price is a leading indicator of growth…and there is no question that growth is weak”.
Mr Paolini expects that global GDP could grow by just 3 per cent this year, below the previous three years’ average of 3.4 per cent.
Anna Stupnytska, global economist at Fidelity Worldwide Investment, is even less optimistic, predicting that growth could come in below 3 per cent this year.
She said: “The collapse of copper is an indication of what is going on in China and it will continue to struggle through this year… overall, looking at the backdrop today, it suggests a meaningful slowdown.”
China accounts for more than 40 per cent of global copper consumption.
Markets have already had to cope with the devaluation of the Chinese renminbi, which has been interpreted as a further sign of cooling growth.
Global markets suffered their worst week of the year as these developments unnerved investors. Ms Stupnytska thinks these difficulties will continue into next year, adding “the picture is getting more complicated” for investors.
“The supportive forces that have helped the developed market, like lower energy prices and currency weakness, are no longer going to be there in 2016. That tailwind will fade into next year,” she said.
Worries about global growth are increasing among fund managers. The latest fund manager survey from Bank of America Merrill Lynch found that overall, fewer investors are confident about economic growth. Just 53 per cent of investors expect the global economy to strengthen in the coming year, down from 61 per cent in July.
David Stubbs, global market strategist at JP Morgan Asset Management, agreed and has “modestly downgraded” his expectations on global growth.
“In the short term we see the fall-out of currency and commodity prices on companies,” he said.
But he added: “Just looking at commodity prices would lead to an overly bearish view.
“The bigger picture is global companies are consumers of commodities, and so their key input is getting cheaper, which is good for ongoing growth.”
Philip Lawlor, chief investment strategist, Smith & Williamson, agreed and said: “It is easy to over-extrapolate the message, but it is still telling”.
