Canada cuts rate, entering recession

Canada is falling into recession. From Bloomberg on Tuesday:

The Bank of Canada lowered its benchmark interest rate by more than anticipated to a half- century low and signaled more action may be needed as economic growth sputters amid a “broader and deeper” global slump.

Governor Mark Carney and his rate-setting panel slashed the target rate for overnight loans between commercial banks by three-quarters of a point to 1.5 percent, the lowest since 1958. Two of 23 economists surveyed by Bloomberg predicted the move, with 20 calling for a half-point cut and one calling for a quarter of a point.

Canada’s economy “is now entering a recession,” the central bank said in a statement from Ottawa today, the first time it has made that assessment outright. “The Bank will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required.”

The UK economy may also be entering a recession. Reuters reports:

Factory output shrank sharply in October, property sales are at a record low and the Christmas season is failing to ignite retail sales as evidence grows that Britain is entering a long and painful recession...

The Office for National Statistics said industrial output fell 1.7 percent on the month, more than three times the rate predicted by analysts and the biggest fall since January 2003...

The Royal Institution of Chartered Surveyors said the extent of house price falls eased slightly in November but home sales hit their lowest level since the RICS survey began in 1978 -- at an average of just 10.6 per surveyor and 55 percent down on a year ago...

Like-for-like retail sales fell 2.6 percent on the year in November, the biggest decline for more than three years, according to the British Retail Consortium.

And from another Reuters report:

Britain's economy shrank by a full percentage point in the three months to November and the pace of contraction looks set to accelerate into the end of the year, a leading think-tank said on Wednesday.

We already know that Japan is in recession, but Tuesday brought news that it is worse than we thought. From AFP/CNA:

Japan's economy shrank 0.5 per cent in the three months to September - 1.8 per cent on an annualised basis - entering its first recession in seven years with a second straight quarter of negative growth, the government said.

An initial estimate last month had shown the Japanese economy shrank 0.1 per cent in the third quarter, and 0.4 per cent on an annualised basis.

And it is not about to get better soon. Japan's leading index plunged in October, as did machinery orders.

Germany, though, had good news for once, the ZEW index of investor confidence rising to minus 45.2 in December from minus 53.5 in November. However, exports from Germany -- as well as France -- were down in October.

Even China may be seeing falling exports. From Bloomberg on Tuesday:

“Things are not so good,” Fan Gang, an adviser to the central bank, said at a Beijing forum today. “November figures will come out soon, and industrial growth will be something around 5 percent and export growth will be negative.”

With the global economy looking so gloomy, no wonder there is a flight into US Treasuries. Again from Bloomberg:

Treasuries rose, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression.

The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent, the lowest since it starting auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills today at zero percent for the first time since it began selling the debt in 2001...

The National Association of Realtors’ index of signed purchase agreements, or pending home resales, fell a less-than- forecast 0.7 percent to 88.9 from a revised 89.5 in September, according to a report from the group today in Washington.