Global cos cautious on high energy price, weak dollar
Reuters, Washington
Companies around the world reported the chill effects of high energy prices and a falling dollar this week, but barometers of aggregate global economic activity continue to flash more positive signals.The most striking feature of the week's surveys of manufacturing and service sector companies from Japan to Europe and the United States was a divergence in fortunes between a more upbeat US corporate sector and gloomier overseas companies. Some say the effects of the dollar's 5 percent decline against a basket of world currencies over the past month is partly to blame as it hits export-dependent economies of the euro zone and Japan while lifting US exporter optimism. The overall picture from all surveys showed only a mild slowdown, however, with JPMorgan's combined index down to 55.7 from 57.0 in October and well above the boom-bust 50 level. "They remain consistent with a healthy pace of global GDP growth of near 3 percent," said David Hensley, director of global economics coordination at JPMorgan in New York. But a weaker-than-expected US employment report for November, released on Friday, suggests lagged effects from high oil prices, as well as rising US official and long-term interest rates, may be having a dampening effect stateside too. "It's showing that there's some caution. No one's sure with higher rates and fuel prices up that there's going to be a tomorrow," said David Litmann, chief economist at Comerica Bank in Detroit. "But the report is still very strong and we're heading into 2005 with very strong momentum." Despite a weaker jobs picture, where the 112,000 rise in non-farm payrolls last month was about 70,000 less than forecast, Wall Street still expects the Federal Reserve to raise interest rates this month for the fifth time this year. It also expects a further hike in February. Long-term interest rates retreated on the jobs data but 10-year Treasury yields are up a quarter point on the month. The first ray of light for the world economy over the past month has been a deepening correction in oil prices -- which have now retreated some 25 percent from the record levels above $50 per barrel set in late October. To the extent sky-high oil was acting as a tax on growth, its fall will relieve pressure.
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