[Marxism] Global manufacturing slump worst since the Great Depression

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times, January 3, 2009
Manufacturing Reports Show Depth of Global Downturn
By BETTINA WASSENER

 From Australia to Asia and Europe to the United States, the message on 
Wednesday in the latest economic reports was clear: manufacturing 
continued to slump amid the worst slowdown since the Great Depression.

In the United States on Friday, a crucial measure of manufacturing 
activity fell to the lowest level in 28 years in December. The Institute 
for Supply Management, a trade group of purchasing executives, said its 
manufacturing index was 32.4 in December, down from 36.2 in November.

“Manufacturing activity continued to decline at a rapid rate during the 
month of December,” said Norbert J. Ore, chairman of the Institute for 
Supply Management Manufacturing Business Survey Committee. This index 
was at the lowest reading since June 1980, when it was 30.3 percent.

“This report indicates that the U.S. economy was on even weaker footing 
than commonly believed as 2008 came to a close,” said Joshua Shapiro, 
chief United States economist at MFR. “Moreover, the signal from the 
export orders index is that the rest of the world is right there with 
us. Hardly a signal for economic recovery anytime soon.”

In addition, Mr. Ore said, “new orders have contracted for 13 
consecutive months, and are at the lowest level on record going back to 
January 1948.”

The new orders index was 22.7 percent in December, 5.2 percentage points 
lower than the 27.9 percent registered in November.

No industry sector surveyed reported growth in December; the jobs sector 
was particularly grim. The employment index was 29.9 percent in 
December, a decrease of 4.3 percentage points from November. That was 
the lowest reading since November 1982.

In Europe, a closely watched index of purchasing managers showed 
manufacturing hit a low in December, falling to 33.9 from 35.6. Any 
reading above 50 signals growth, while a reading below 50 indicates 
contraction in manufacturing. Similarly grim readings in Australia, 
China and India highlighted how the Asia-Pacific region has become 
caught up in the global turmoil.

In China, the purchasing managers’ index by the brokerage firm CLSA 
showed the manufacturing sector had contracted for a fifth consecutive 
month. The survey showed the steepest decline in its history.

With five back-to-back purchasing index readings signaling contraction, 
“the manufacturing sector, which accounts for 43 percent of the Chinese 
economy, is close to technical recession,” said Eric Fishwick, head of 
economic research at CLSA in Hong Kong, in a note with the release.

The data added to the flood of statistical evidence from across the 
Asia-Pacific region showing that activity was slowing faster than 
previously thought as demand withers in the United States and Europe.

Australia’s manufacturing index showed a seventh month of contraction, 
and a similar survey in India showed activity down for a second month in 
December. In South Korea, December data showed exports plummeted 17.4 
percent from a year ago.

President Lee Myung-bak of South Korea pledged on Friday that the 
government would go into emergency mode to pull the country out of its 
economic crisis.

And in Singapore, the economy shrank 12.5 percent in the last quarter of 
2008 from the previous period, causing the trade and industry ministry 
to lower its growth forecast for 2009. The ministry now expects 
Singapore’s economy to shrink up to 2 percent, with only 1 percent 
growth at best. Previously, it had expected up to 2 percent growth.

The worsening data, combined with a stream of company profit warnings, 
production cuts and layoffs, raises the pressure on policy makers to 
step up their efforts to bolster their economies.

India on Friday cut its main interest rate by a full percentage point, 
to 5.5 percent, and took a series of steps to bring more money into the 
country. It also raised the limit on overseas investments in corporate 
bonds to $15 billion, from $6 billion, and will contribute 200 billion 
rupees ($4 billion), to increase the capital of state-run banks.

Countries across the region were widely expected to make more interest 
rate cuts in coming weeks.

“China’s economic outlook for 2009 will be best characterized as 
‘getting worse before getting better,’ laying the foundation for a 
firmer recovery in 2010,” said Qing Wang, chief economist for Greater 
China at Morgan Stanley in Hong Kong.

Mr. Wang expected growth to continue to slow in the first six months, 
before stimulus measures could take effect. “The authorities have 
already made delivering economic growth a top policy priority by 
adopting a campaign-style policy execution approach,” he said.

Mr. Wang expects interest rates to be cut aggressively by an additional 
1.35 percentage points this year. The country’s important one-year 
lending rate is 5.31 percent. He added that a $586 billion stimulus 
package announced in November “is unlikely to be the first and only 
stimulus package for the entire year.”

The package includes substantial infrastructure spending, which will 
begin to lead to increased activity once weather allows construction to 
begin in the spring. “The stimulus package provides a short-term buffer 
for the economy, and other policy measures such as health care and land 
reforms will be a long-term growth driver. This should help the stock 
market at least to stabilize in 2009,” said Yi Tang, general manager at 
Edmond de Rothschild Asset Management in Hong Kong.

“We are seeing some encouraging signs that institutional investors are 
starting to consider putting money back into equities in China and the 
rest of Asia, hopefully in the next month or two,” he said. “But it will 
take longer for retail investors — who are worried about their job 
prospects and the wider economy — to go back into the market.”

Jack Healy contributed reporting.

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