The global slump is worsening as the US and Japanese, and possibly part of Europe, lurch further into the mire.
The European Central Bank signalled yesterday that its recent spate of cuts will stop at next week’s monthly meeting as it considers the state of the eurozone economy.
German unemployment jumped as the slump started hurting the wider economy.
But for the badly damaged US and Japanese economies, the news wasn’t good and won’t improve.
Figures out today in Japan are expected to show another big fall in industrial production in December to go with the record 8.5% slump in November, and the 35% drop in exports in December.
A report yesterday from the government said that Japan’s retail sales posted the largest decline in almost four years as the slump bites harder and the economy slides deeper into the red.
Sales in December fell 2.7% from the same month of 2007, the biggest drop since February 2005, the Trade Ministry said yesterday.
Several Japanese companies, led by Sony, reported prospective losses and held out the threat of worse to come this year, and job losses.
In the US new home sales fell further in a surprise and durable goods orders dropped in december for the 5th month in a row and fell over 2008 as a whole.
Jobless claims hit a new record last week and Ford had a record loss for the December quarter and for 2008 a whole it fell into the red to the tune of $US14.6 billion.
The news yesterday confirmed the gloomy commentary from the International Monetary Fund and the Fed.
Later today the US he government releases the first estimate of the December quarter’s economic performance. While historical, it will be dramatic.
There won’t be any growth: economists are saying the figures will show an economy shrinking at an annual rate of at least 4% and probably above 5.5%.
The GDP estimates will be updated twice over the next six weeks or so as more figures come in on exports, consumer spending, income and credit: all have been weak to rotten in the past four months and showing signs of worsening.
Now we have the latest statement from the Fed and commentary in various 4th quarter profit reports from leading US companies, telling that the downturn not only accelerated in December, but has deepened this month in some cases.
Indeed the New York Times Company said its advertising fell 18% in the December quarter and that this sharp fall (which worsened in the month of December) "had accelerated into this month" according to the company’s CEO on a conference call.
US job losses have worsened dramatically: over 150,000 recorded in the last 10 days, with tens of thousands more going in Europe, the UK, Australia, Japan and elsewhere.
And, yesterday more gloom. Big manufacturers, textron and the 3M Company are among the manufacturers lowering 2009 profits and slashing capital spending in the year ahead, which will be further bad news.
If there was any lingering doubt (such as in the collective heads of some in politics, business and the economics profession that the global economy is heading south and dragging Australia with it, then reports and statements from the US Federal Reserve, the International Monetary Fund and the International Labour Organisation, should put that right.
The trio of commentaries from some of the world’s major economic oversight and policy bodies makes clear the global slump is not ending, despite attempts in the US sharemarket to call a bounce with the $US825 billion Obama boost package heading for its first Congressional vote which it passed easily.
It’s now off to the US Senate where the will be a bigger fight, with a bunch of Republican senators still in denial over their part in the disaster and determined to frustrate and delay the spending and tax cut package.
The Fed’s statement in Washington after a two day meeting, was long, detailed, and if anything more gloomy than the December meeting’s statement where rates were cut to 0%-0.25% and a start made on a major quantitative easing to try and restart the slumping economy.
"The Committee continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.
"Information received since the Committee met in December suggests that the economy has weakened further.
"Industrial production, housing starts, and employment have continued to decline steeply, as consumers and businesses have cut back spending. Furthermore, global demand appears to be slowing significantly.
"Conditions in some financial markets have improved, in part reflecting government efforts to provide liquidity and strengthen financial institutions; nevertheless, credit conditions for households and firms remain extremely tight.
The Committee anticipates that a gradual recovery in economic activity will begin later this year, but the downside risks to that outlook are significant.
"In light of the declines in the prices of energy and other commodities in recent months and the prospects for considerable economic slack, the Committee expects that inflation pressures will remain subdued in coming quarters.
"Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term."
And this is very important: the Fed gathers comments and anecdotal evidence from across the country for briefing notes for its meeting. That’s later turned into the ‘Beige Book" and released.
It’s the viewers of businesses across the spectr
