World Economy Is Yet to Bottom, People’s Bank of China Says

The world economy hasn’t bottomed out yet, adding to “great uncertainties” about where commodity prices are heading, China’s central bank said.

The “external economy has yet to bottom out or establish a trend towards a recovery,” the People’s Bank of China said in regional reports posted on its Web site today. “The global financial crisis is still spreading and the impact on China is deepening.”

The central bank’s view contrasts with speculation that the worst of the global recession may be over, after consumer confidence jumped in the U.S. The Reuters/Jefferies CRB Index of 19 raw materials, including oil and copper, is down about 43 percent from a year ago.

China faces challenges including faltering demand, overcapacity in some industries, falling government revenue and rising unemployment, the central bank said. Economic growth slumped to 6.1 percent, the least in almost a decade, in the first quarter after global trade collapsed.

China’s producer prices fell last month by a record, flagging the risk that entrenched deflation will smother growth in the world’s third-biggest economy. While extra investment within China will help to “stabilize” those prices, the global economy isn’t likely to make a similar contribution, the central bank said.

“There are still great uncertainties on the future trend of commodity prices,” the People’s Bank of China said.

To contact the reporter on this story: Paul Panckhurst in Beijing at ppanckhurst@bloomberg.net

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