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Economy in Brief

Global Manufacturing Expansion Continues, But Will Rising Energy Costs Hurt?
by Carol Stone April 1, 2004

Purchasing Managers' surveys in many countries showed manufacturing activity improved in March, according to a compilation published by NTC Research, an affiliate of Reuters in London. For some regions, an improving trend was extended, while in others, vigor increased after a pause in February.

New orders and output were both firmer in most countries. For example, output in Italy rose from 51.2 to 53.2 and new orders, from 52.7 to 53.7. In Japan, output was up from 56.8 to 57.9 and new orders from 57.6 to 58.4.

At the same time, another widespread phenomenon was a sharp advance in input prices. This development is less favorable for ongoing business strength. Recent commodity price trends suggest that metals and petroleum are major sources of the increases in manufacturers' input prices. Petroleum in particular is a concern, as seen in the accompanying graph. Petroleum and products are priced in dollars, but even translated for the dollar's recent weakness versus the Euro, crude oil is rising in Euro terms as well. It thus remains to be seen what kind of impact these cost increases will have on the evolving world expansion in manufacturing activity. Some years ago, such increases were passed through to consumers and inflation accelerated. More recently, consumers have been less willing to take on this inflation burden and business slowdown has resulted.

PMI Indexes, 50+=Expansion Mar 2004 Feb 2004
Euro-Zone 53.3 52.5
UK 53.7 53.0
Japan 55.3 54.6
Russia 53.7 52.2
Poland 55.2 54.1
Euro-Zone Input Prices 65.3 59.4
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