| PARIS, April 23
PARIS, April 23 Economic reports from Europe and
Japan on Wednesday highlighted the damage a U.S. downturn could
do to exporting nations and raised questions about the extent to
which China and other fast developers can fill the void.
Japanese trade data for March illustrated both sides of that
story and business surveys in Europe suggested manufacturers may
be heading for a period of weaker global demand, with the euro's
strength making it even harder to compete on price.
Japanese exports rose 2.3 percent in March compared with
March 2007 but exports of cars and other goods to the United
States dropped 11 percent, finance ministry data showed.
Exports to China and Asia broadly rose, but the rise was the
smallest in three years, it said.
That provided little comfort to those who argue or hope that
fast-growing emerging market economies will make up for at least
a significant part of lost export demand from a U.S. economy
which is now widely believed to be in the clutches of recession.
"Decelerating worldwide growth is taking a toll on Japan's
exports gradually," said Hiroshi Shiraishi, economist at Lehman
Brothers bank in Japan.
In Europe, business surveys regarded as the closest thing to
real-time readouts of what is happening showed that new
manufacturing orders, including export orders, shrank in the
euro zone for the first time in three years.
The RBC/NTC Eurozone Purchasing Managers Index (PMI) for the
manufacturing sector dropped to 50.8 in April, from 52.0 in
March, its lowest since August 2005, while the gauges for new
orders fell below 50, signalling contraction.
"So far, the manufacturing sector in the euro zone has
proved remarkably resilient to the combination of strong euro
and slower U.S. demand. This might have recently changed," said
Gilles Moec, economist at Bank of America in London.
The euro, which hit a record high above $1.60 on Tuesday, is
roughly 17 percent higher against the dollar than this time last
year, before the U.S. housing slump and collapse of the subprime
mortgage market there sparked a global credit squeeze.
Bucking the gloom on the industrial side, a similar index
for the services sector, which accounts for a larger share of
total economic activity in developed economies, registered an
acceleration in the pace of activity growth in April.
"The overall softening in economic activity in the euro zone
is still very gradual," said Moec, who nonetheless highlighted
the headache for central bankers when soaring inflation argues
for higher interest rates but higher rates could hurt growth.
Food and energy price inflation is causing trouble across
the world, sparking protests and riots in the poorer countries
and increasing strains on household budgets everywhere.
In Asia, the latest reports on Wednesday showed inflation at
its highest in 26 years in Singapore and in 17 years in
Indonesia and Vietnam raised inflation forecasts and the
Philippine central bank said it would look at raising rates if
commodity price rises began feeding into wages and other costs.
Polls conducted by Reuters and published on Wednesday showed
economists are lowering their growth forecasts and raising their
inflation forecasts for most of the world's big industrialised
The U.S. poll, compiled from soundings of more than 100
economists, showed they had cut their forecasts for growth this
year to 1.0 percent, from the 1.8 percent they were forecasting
in January, and raised their inflation forecast to 2.4 from 2.2
The poll showed growth this year forecast at 1.5 percent in
the euro zone, down from a January forecast of 1.8, while the
prediction for inflation in 2008 jumped to 3.0 from 2.5 percent
For the UK, the growth forecast was lowered to 1.7 percent
from 1.9 and inflation raised to 2.6 from 2.3 in the previous
Reuters polls in January.
For Japan, the 2008 growth forecast was cut to 1.4 from 1.8
and inflation raised to 0.7 from 0.4 percent -- in the only
major industrialised economy where deflation rather than
inflation has been a problem.
(Additional reporting by Leika Kihara in Tokyo, Nigel Davies in
London; Editing by Ruth Pitchford)