Manufacturing is contracting in the US, Eurozone, Russia and China. Let’s take a look starting with U.S. Manufacturing Shrinks as Orders Hit 60-Year Low.
The decline in U.S. manufacturing deepened in December as demand for such products as cars, appliances and furniture reached the lowest level since at least 1948, signaling further cutbacks in factory jobs and production this year.
The Institute for Supply Management’s factory index [Manufacturing ISM] fell to 32.4, below economists’ forecasts and the lowest level since 1980, from 36.2 the prior month. Readings less than 50 signal contraction. The group’s new-orders measure reached the lowest level on record and prices slid the most since 1949.
The report also showed the impact of recessions abroad: the Tempe, Arizona-based ISM’s measure of exports fell to the lowest level since that series began in 1988.
Separate figures today showed business at European factories contracted in December by the most on record. Manufacturing declined in China for a fifth month in December, for an eighth month in the U.K., for a seventh month in Australia and at the fastest pace in at least 14 years in Sweden.
U.S. exports dropped in October for a third straight month, leading to an unexpected widening in the trade gap, figures from the Commerce Department last month showed. The drop indicated the economy was sinking even faster than previously estimated.
China Manufacturing Shrinks for 5th Month
Bloomberg is reporting China Manufacturing Shrinks for 5th Month on Exports.
China’s manufacturing contracted for a fifth month in December as recessions in the U.S., Europe and Japan sapped demand for exports, a survey showed.
The CLSA China Purchasing Managers’ Index stood at a seasonally adjusted 41.2, compared with a record low of 40.9 in November, CLSA Asia-Pacific Markets said today in an e-mailed statement. A reading below 50 reflects a contraction.
Manufacturers in industries from metals to toys are reducing production or closing down. Aluminum Corp. of China Ltd., the nation’s biggest maker of the metal, and Yunnan Tin Co., the world’s largest producer of tin, cut output as prices fell.
“Chinese manufacturing was very weak in December,” said Eric Fishwick, head of economic research at CLSA in Singapore. “With five back-to-back PMIs signaling contraction, the manufacturing sector, which accounts for 43 percent of the Chinese economy, is close to technical recession.”
The output index fell to a record low of 38.6 last month from 39.2 in November, while the measure of new orders rose to 37 from 36.1. The index of export orders jumped to 33.6 from 28.2, CLSA said.
“Chinese manufacturers reduced the size of their workforces at the fastest rate recorded by the series to date,” today’s report said. An employment index tracked by CLSA has contracted for five consecutive months to 45.2 in December.
China’s economic growth may have slipped to 5.5 percent last quarter, the weakest pace in at least 15 years, according to Shanghai-based Industrial Bank Co.
Exports fell for the first time in seven years in November, imports plunged and industrial output grew at the slowest pace in almost a decade. The government has responded to the deepening slowdown with the stimulus package running through 2010, interest-rate cuts and reductions in export taxes.
I am skeptical of reports that have Chinese GDP growing at 5.5% or higher with this carnage in manufacturing and exports.
European Manufacturing Contracts At Fastest Pace On Record
The European recession deepens as Manufacturing Contracts 7th Consecutive Month.
European manufacturing contracted in December by more than initially estimated and at its fastest pace on record, signaling the recession is deepening.
A measure of manufacturing fell to 33.9 last month from 35.6 in November, according to a survey of purchasing managers by Markit Economics. That was lower than a Dec. 16 calculation of 34.5 and the weakest since the report was introduced in 1998. A reading below 50 indicates contraction.
Manufacturing shrank for the seventh consecutive month as businesses feel the pain of tighter bank lending, the euro’s rise to a record against the pound and weaker demand at home and abroad even after the price of oil fell more than 70 percent from a July peak of $147 a barrel.
ECB President Jean-Claude Trichet has signaled that he wants to pause. As Europe continues to sink, I expect more cuts. This will pressure the Euro.
Russian Manufacturing PMI Shrank the Most on Record
Bloomberg is reporting Russian Manufacturing PMI Shrank the Most on Record in December.
Russian manufacturing shrank at a record pace in December as slumping foreign and domestic demand led to production and jobs cuts, VTB Bank Europe said.
VTB’s Purchasing Managers’ Index contracted for a fifth month to 33.8, from 39.8 in November, the bank said in an e-mailed statement today. That is lower than at any time during the 1998 economic collapse, when the government dropped its support of the ruble and defaulted on $40 billion of domestic debt. A figure above 50 means growth, below 50 a contraction. The bank surveyed 300 purchasing executives.
“We’ll probably find the economy contracted in the fourth quarter, the first of three consecutive quarters,” said Maxim Oreshkin, head of research at OAO Rosbank, said in a telephone interview. “Manufacturing will lead this process, followed by lower retail consumption in the first quarter.”
The world is in recession.
Mike “Mish” Shedlock
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