Outlook subdued for global industry

  • Business
  • Wednesday, 05 Mar 2003

NEW YORK: The outlook for global industry is subdued at best with manufacturing surveys from the United States, Europe and Japan showing either the barest evidence of growth or outright contraction. 

In a range of reports released this week, companies everywhere complained that geopolitical uncertainty was choking consumer demand while rising energy costs were crimping margins.  

That’s a painful vice for corporate profits and partly explains why equity markets have been so depressed this year. 

The biggest disappointment came in the United States, where new orders pulled back sharply, while a measure of manufacturing employment fell to its lowest level in a year. Since the United States is the world’s largest economy, softness there often presages a slowdown elsewhere. 

“You look around the world right now and there is no locomotive of growth,” said Ethan Harris, co-chief economist at Lehman Brothers here. 

“The US is doing its bit by importing a lot but that’s really by default; growth here is nothing to shout about. Even if the Iraq situation is resolved favourably, we only see US growth of 3% in the second half of the year and that’s pretty subdued historically,” he said. 

Omens are not good for the current quarter, with the Institute for Supply Management’s (ISM) survey of US manufacturing showing a pull-back in its main business index to 50.5 in February from 53.9 in January. That is well below market forecasts of 52.4 and only just above the 50 barrier that separates growth from contraction. 

And alarming for an already depressed jobs outlook, the ISM’s index of employment slumped to 42.8 from 47.6, its lowest reading in a year and a grim omen for the February US payrolls report due this Friday. 

Meanwhile, Reuters surveys showed manufacturing activity slowed in Japan and Britain while the euro zone sector stabilised, thanks to better German export orders. 

The Reuters Eurozone Purchasing Managers’ Index crept above the 50 level for the first time since August but only to 50.1, just beating a consensus forecast of 49.5. 

Germany, the euro zone’s biggest and most sluggish economy, enjoyed its best growth in new orders for two years, though that was partly driven by customers stocking up for fear that war would disrupt supplies and prices. 

The Japanese survey also showed some companies building stocks against the threat of war, but that merely slowed the rate of shrinkage in new orders. 

The Japan new orders index rose to 47.2 in February from 46.5 in January, while the Japanese headline index rose to 48.1 from 47.8. 

In Britain, the manufacturing survey showed the sector shrinking in February for the third straight month.  

The main index slipped to 48.6 from a revised 48.7 in January. Output grew slightly but at the weakest level since January 2002. – Reuters  

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