LONDON, 2 April 2003 — The shaky world economy suffered further damage in the build-up to war in Iraq and in the first few days of the conflict, surveys suggested yesterday.
A major Reuters poll of economists showed they had trimmed their forecasts for growth in all the world’s seven major economies, with the exception of Japan.
And a key survey of Euro zone manufacturing industry showed an incipient recovery detected earlier in the year was snuffed out in March. In any case, the report suggested, the improvement in January and February may have resulted from firms building up stocks as war loomed.
A report from the Bank of Japan on companies’ sentiment, a French poll of consumer confidence and British retail sales data added to the depressing picture.
In US, the Institute for Supply Management’s manufacturing index fell to 46.2 last month, slipping from February’s 50.5 measure. A reading below 50 means manufacturing activity is contracting. Analysts had expected war fears to cut into manufacturing, though not by this much, and had forecast a reading of 49.
The Reuters survey of 180 economists showed they now expect US gross domestic product to rise by 2.4 percent this year compared with 2.7 percent forecast in January.
Growth in the euro zone giants Germany and France is now seen at 0.7 and 1.2 percent respectively and the British outlook has been pared back to 2.0 percent from 2.5. By contrast Japan is seen growing 0.8 percent, double the January figure.
“I think Iraq ... the geopolitical uncertainty...is certainly a factor weighing on (US) business spending decisions, both for new plants and equipment and on new hiring,” said Peter Hooper, chief US economist at Deutsche Bank in New York.
The findings of the survey were announced hours after a key pointer to the state of euro zone manufacturing industry showed a sharp downturn in March.
The Reuters Euro zone Purchasing Managers Index fell to 48.4 from the 50.1, just above the 50 line which divides growth from contraction, to which it had struggled in February.
In Germany, the euro zone’s largest economy, the index fell to 47.8 from 49.9, reflecting a sharp decline in new orders.
Parallel surveys from outside the euro zone showed that the manufacturing downturn there was not an isolated phenomenon. In Britain, where manufacturing has long been the economy’s Achilles’ heel, the Chartered Institute of Purchasing and Supply’s index fell to 46.1 from 48.1 in February.
However, the Japanese Reuters/Nomura/JMMA Purchasing Managers survey provided some relief, rising to a seasonally adjusted 48.9 from 48.1 in February, although it was below the neutral 50 mark for the seventh month in a row.
A survey by France’s national statistics office, meanwhile, showed that even before a shot was fired in anger in Iraq, consumer confidence in the country which had striven to avoid a conflict had fallen to its lowest since December 1996.
Across the Channel, the Confederation of British Industry said its index of retailers showed the biggest annual fall in sales since July 1992, falling to -13 percent last month from +2 in February according to polling completed on March 19.
Earlier, the Bank of Japan’s quarterly “Tankan” survey of some 8,000 companies confirmed the economy was limping along.