Commodity prices are next threat to the economy

A great deal has been made of the fact that rising oil and gas prices could undermine the economic recovery by forcing consumers and businesses to spend more money on energy.

The problem may actually be broader than that because metals and agricultural prices are moving up, too, and that will affect the cost of everything -- from groceries to home improvement supplies.

According to Bloomberg, Goldman Sachs (GS) believes that commodities prices could rise more than they have in 24 years, bring investors a return of 19% in 2009. And while this may help investors, it could hurt an already struggling economy.

One of the few bright spots in the recession is that it has driven down the price of gas and other commodities-based products, giving consumers and businesses some relief from the high costs of everyday living. Whatever small disposable income has been left during the recession is there primarily due to falling prices of the key elements that make up the components of many manufactured goods and chemicals.

Will commodities prices move up 19 percent this year? This only a guess by Goldman. If it is right, though, the economy faces more headwinds in the second half than are currently expected.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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