US in recession, global manufacturing and stock markets collapse

Finally, we have official confirmation that the US economy is in recession. From the National Bureau of Economic Research:

The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.

Incidentally, the ISM manufacturing index had dipped below 50 in December 2007. And if it is anywhere close to being reliable, it looks like the recession is deepening. From Bloomberg on Monday:

American manufacturing contracted in November at the steepest rate in 26 years, leading Europe and Asia into an industrial slump as a recession that began in the U.S. in December 2007 spread around the globe.

The Institute for Supply Management’s factory index dropped to 36.2, below economists’ forecasts, and its gauge of raw- material costs plunged to the least in six decades, intensifying concern over deflation...

The U.S. ISM’s purchasing managers’ gauge of new orders for factories decreased to 27.9, the lowest since 1980, from 32.2 the prior month. The production measure fell to 31.5 from 34.1...

The index of prices paid dropped to 25.5, the lowest level in six decades, from 37. That adds to concern that the U.S. economy may be at risk of deflation...

There was bad news in construction too.

A report from the Commerce Department also showed construction spending fell 1.2 percent in October, a bigger drop than forecast, as a slump in homebuilding spread to non- residential projects such as power plants, churches and highways.

For manufacturing, the weakness was pretty much global. From Reuters on Monday:

The Markit Eurozone Purchasing Managers Index (PMI) for the manufacturing sector slumped to 35.6 in November, a low not seen in the survey's 11-year history and well below the 36.2 flash reading and economists' forecasts...

Britain's manufacturing PMI tumbled to a record low of 34.4, well below the Reuters consensus for 40.0. It was also the biggest one-month fall in the series, which began in 1992, at the tail end of Britain's last recession.

It was the same story even in supposedly fast-growing China. Bloomberg reports:

China’s manufacturing shrank by the most on record and export orders plunged, adding to evidence that recessions in the U.S., Europe and Japan are dragging down the world’s fastest-growing major economy.

The Purchasing Managers’ Index fell to a seasonally adjusted 38.8 in November from 44.6 in October, the China Federation of Logistics and Purchasing said today in an e-mailed statement. A second PMI, released by CLSA Asia-Pacific Markets, also showed a record contraction.

Last week, Japan had released a similarly gloomy manufacturing report. From Reuters:

Japanese manufacturing contracted for a ninth straight month to a new record low in November, the Japan Purchasing Managers Index showed on Friday, in yet another sign of the toll the global financial crisis is taking on the economy...

The Nomura/JMMA Japan Purchasing Managers Index (PMI), which gives an early snapshot of the health of manufacturing, fell to seasonally adjusted 36.7 in November from 42.2 in October.

And another survey reported today confirms the weak outlook for Japanese manufacturers. Again from Reuters:

The yen's rise against major other currencies and worsening demand both at home and abroad helped push manufacturers' sentiment down to minus 42 from minus 25 in October in the Reuters Tankan, the biggest monthly drop on record...

The Reuters Tankan showed sentiment in the service sector at its lowest point since August 2003, with the index down seven points at minus 16.

Stock markets around the world were pummelled by the avalanche of bad news. From Bloomberg:

U.S. stocks slid the most since October, wiping out more than half of last week’s rally, on growing concern the global economic slump is deepening and consumers’ access to credit is shrinking...

The S&P 500 sank 8.9 percent to 816.21, with financial stocks in the index tumbling a record 17 percent as a group. The Dow Jones Industrial Average plunged 679.95 points, or 7.7 percent, to 8,149.09 with all 30 companies declining. The Nasdaq Composite Index declined 9 percent to 1,398.07. Almost 38 stocks retreated for each that rose on the New York Stock Exchange.

It was the same in Europe. Bloomberg reports:

European stocks dropped, sending the Dow Jones Stoxx 600 Index to its first retreat in six days, as record declines in European and Chinese manufacturing signaled the global economic slump is worsening...

The Stoxx 600 declined 6 percent to 193.91, the steepest slide since Oct. 15...

National benchmark indexes decreased in all 18 western European markets. The FTSE 100 dropped 5.2 percent. Germany’s DAX lost 5.9 percent as ThyssenKrupp AG declined for the first time in seven days. France’s CAC 40 slipped 5.6 percent.

Earlier in the day, Asian markets had given a hint of what was to come elsewhere by mostly falling, ignoring Friday's gains in the US. From AFP/CNA:

Asian stocks were mainly lower Monday as dealers remained cautious ahead of a slew of economic data from the United States, while also awaiting decisions on interest rates across the world...

Japan's Nikkei was down 1.35 per cent, while Sydney and Seoul each lost 1.6 per cent and Singapore fell 2.44 per cent.

However, Hong Kong added 1.6 per cent, Shanghai 1.25 per cent and Taipei 1.3 per cent.