LOS ALTOS, CA -- Rising oil prices are dampening the world economy, with Europe and Japan feeling the brunt worse than the U.S. and China. The result: A significant economic slowdown next year.  According to analyst Ed Henderson, the tripling of oil prices over the past few years has forced consumers in those countries to spend on energy instead of goods and services. Further, European homeowners have “far less liquid” mortgages, restricting their access to tapping into their homes for cash.

In his October newsletter, Henderson said gradual price hikes, oil below inflation-adjusted 1980 prices, low interest rates and a strongly expansive fiscal and monetary policies have boosted the U.S. economy. Henderson forecast “a significant economic slowdown” for next year. He forecasts 2.6% growth, down from 3.2% this year and 4% in 2004. The 2007 growth rate will rebound to 3.3%, he said.

Henderson also forecasts a slip in electronics equipment sales. Henderson expects the equipment market to bottom next year, with 5.7% growth, down from 11.3% in 2004, and 8.8% this year. He predicts 8.7% growth in 2007.

He points to a drop in consumer electronics output Japan in July, its first in 20 months, and China’s slowdown in electronics and IT. The latter is deceptive, Henderson admits: first-half sales there were up 21.1%.

However, the data are conflicting. In Taiwan, notebook shipments were up 40% during the first half. Unit PC shipments were up 8.7% in the first quarter and 14% in the second, year-on-year. And mobile phone shipments remain strong.

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