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Real US consumer spending fell by 0.2 per cent in June, as rising inflation offset the impact of $100 billion in rebates for US taxpayers.

Commodity prices measured by the CRB index plunged 10 per cent in July, the most in any month since March 1980, when the US economy was in a reces¬sion. A worsening global growth outlook and prospects for increased supply sent crude oil, soybeans and gasoline tumbling from record highs last month.

Energy and rawmaterial stocks have fallen into bear mar¬kets. A gauge of 117 energy pro¬ducers in the MSCI World Index dropped 21 per cent from its May record. A measure of min¬ing, farm and chemical compa¬nies declined 22 per cent from its high. A bear market is com¬monly defined as a slump of 20 per cent or more.

"Markets are increasingly con¬cerned about the outlook for global growth," Darren Gibbs, chief economist at Deutsche Bank AG in Auckland, was quot¬ed as saying by Bloomberg in a report yesterday, but can emerg¬ingmarket consumers lend sup¬port to oil, Merrill Lynch has asked.

According to Merrill Lynch's research, in a short period, oil prices have fallen by $20 per barrel while leading indicators in key OECD regions have contin¬ued to deteriorate, suggesting a synchronous global economic slowdown ahead, but when it comes to oil, looking at OECD demand and prices is deceptive. On estimates, the OECD as a group has contributed just 15 per cent of global oil demand growth since 2000.

While the huge share of the US consumer in the global economy is now shrinking rapidly due to the credit crunch, domestic con¬sumption in emerging markets has proved quite resilient.

More importantly, Merrill Lynch said, we cannot find a single year of negative emergingmarket oil demand growth in four decades, if we exclude the former Soviet Union.

On top of this, high prices have done little to dent emerg¬ingmarket oil demand growth historically.

"While the upside risks to oil prices may not be as acute as in the first half, strong emergingmarket performance will likely keep markets relatively tight in the coming months," Merrill Lynch said.

The company maintains its average WTI oil price forecast of $124 per barrel in the third quar¬ter and $119 in the fourth.