Global business suffers from energy costs, but growth brisk

WASHINGTON - Businesses around the world felt the pinch from rising energy costs last month, according to surveys of some 10,000 executives, but the weakness was concentrated in manufacturing and global growth remains brisk. 

The latest monthly surveys of purchasing managers at manufacturing and service sector firms in the United States, Europe and Asia showed activity cooled a touch during April. 

As ever, the overview masks varying regional and sectoral differences. But economists reckon the readings are consistent with a global growth rate of about 3.5 per cent.  

With the average annual world growth rate over the past 20 years at about 3.6 per cent, according to the International Monetary Fund, the latest surveys suggest the much-feared soft-patch in world activity is relatively shallow so far.  

"The global PMI (Purchasing Managers' Index) indicated a slight easing in growth ... but is still consistent with an increase in global GDP of around 3.5 per cent quarter-on-quarter annualized," said David Hensley, director of global economics coordination at JP Morgan.  

"The trend in employment growth remained broadly stable, suggesting that companies are viewing the slowing in the economy as temporary," he added.  

The Global All-Industry Output Index, produced by JP Morgan, with research and supply organisations covering 20 countries, slipped to 56.0 in April from 56.7 in March, still well above the 50 line that divides growth from contraction.  

While world growth has clearly slowed from the frenetic 5.1 per cent pace recorded in 2004 and has even ebbed from a robust start to the year, there are still many positive signals. 

Job creation held up well during the month, Asian manufacturing appeared to have weathered the energy storm and service sectors in France and Spain - the world's fifth- and eighth-largest economies respectively -- picked up steam.  

The global all-industry employment index dipped only marginally to 51.7 from 52.0, helped by a pick-up in employment in services -- where the jobs index edged up by 0.1 to 52.4.  

Polls of global service firms, released on Wednesday, showed a 0.8 point dip in the overall output index to a still-healthy 57.5. The index of new orders in the service sector actually accelerated.  

"There is a danger of getting carried away with just how weak the apparent soft spot in activity is by just looking at the manufacturing data," said Ed Teather, economist at UBS in London, speaking after the euro zone services report. "Services appear not to be quite as weak at the moment."  

But if energy has been the main spanner in the works in April, a near $10 per barrel drop in benchmark US oil prices from record highs in early April may ease anxiety in May.  

Manufacturing in the euro zone fell below the 50 threshold, flagging contraction and possibly recession in the sector there. But service sector growth remains resilient on both sides of the Atlantic.  

- REUTERS