Japanese exports and manufacturing output plunge in January

Japan's economy is looking very sick at the moment.

On Wednesday, a report showed that exports plunged in January. From AFP/CNA:

Japan's recession woes deepened as a record plunge in exports added to fears on Wednesday that Asia's largest economy is becoming one of the biggest victims of the global crisis...

The trade deficit ballooned to an unprecedented 952.6 billion yen (9.9 billion dollars) in January as exports plunged 45.7 per cent from a year earlier, the finance ministry reported.

Today, there was more bad news. Bloomberg reports:

Japan’s manufacturers cut production by a record 10 percent in January and household spending plunged, adding to evidence that the economy in its worst recession in 60 years.

The month-on-month decline in factory output exceeded December’s record decline of 9.8 percent, the Trade Ministry said today in Tokyo. Household spending fell 5.9 percent from a year earlier, the biggest drop in more than two years...

The ratio of positions available to each applicant slid the most since 1992 in January, dropping to 0.67 from 0.73, the Labor Ministry said today. The unemployment rate unexpectedly fell to 4.1 percent from 4.3 percent as housewives got part- time work to supplement declining incomes, said Koji Katoh, the statistics bureau’s director of labor statistics...

Consumer prices failed to rise in January for the first time in more than a year as households cut spending, the statistics bureau said today, indicating deflation may resurface in the world’s second-largest economy.

US stocks gain but consumer confidence falls

US stocks were up yesterday. Bloomberg reports:

U.S. stocks advanced the most in a month, halting a six-day decline, after Federal Reserve Chairman Ben S. Bernanke’s statement that banks need not be nationalized helped lift equities from their lowest valuations in two decades...

The S&P 500 added 4 percent to 773.14 for the biggest rally since Jan. 21. The Dow Jones Industrial Average increased 236.16 points, or 3.3 percent, to 7,350.94. The Russell 2000 Index of small companies climbed 4.5 percent to 412.48. Ten stocks gained for each that fell on the New York Stock Exchange, the broadest rally since Dec. 16.

Stocks rose despite a report showing consumer confidence plunging in February.

The Conference Board’s consumer confidence index declined more than forecast to 25 this month, the lowest level since data began in 1967, from a January reading of 37.4.

Some analysts think there's hope for more gains in the market.

“There’s overwhelming value in this market,” said Randy Bateman, who oversees $15 billion as chief investment officer of the asset management unit of Huntington Bancshares Inc. in Columbus, Ohio. “If there’s any kind of momentum in the market, people want to jump on board.”

But the falling consumer confidence may have significance for the market nevertheless. Geoffrey Rogow at MarketBeat reports:

Monday’s decline by U.S. stocks to new lows has a different flavor than the late-2008 swoon, one that’s indicative of a total lack of confidence in the outlook for equities.

As major stock indexes hit 11-year lows Monday amid a broad-based sell-off, market participants pointed to retail investors as the culprits. Those same investors played a limited role in the downturn last October and November, when selling by hedge funds and institutional investors dominated.

But with bills piling up, home prices falling, unemployment rising and credit tough to come by, consumers who need money quickly are increasingly cashing out their stock investments.

Back to 1997 and another financial crisis

Yesterday, the US stock market fell to its lowest level since 1997. Bloomberg reports:

U.S. stocks fell, sending the Standard & Poor’s 500 Index to a 12-year low, as concern that the deepening recession will erode earnings offset the government’s pledge to give more capital to banks...

The S&P 500 declined 3.5 percent to 743.33, its lowest close since April 1997. The six-day losing streak in the U.S. stock benchmark ranks as its longest since October. The Dow Jones Industrial Average tumbled 250.89 points, or 3.4 percent, to 7,114.78, its lowest since May 1997. The Russell 2000 Index lost 4 percent.

Incidentally, 1997 saw the start of the Asian financial crisis. This time around, it's the US and European financial systems that are in crisis.

Meanwhile, Martin Weiss thinks that there's worse to come.

The nation’s largest banks are so close to collapse and the world economy is coming unglued so rapidly, a major Wall Street meltdown is now imminent.

Specifically, it’s now increasingly likely that virtually all of our forecasts of recent months could come to pass in a very short period of time, including …

Stock market crash: A swift plunge in stocks to about 5000 on the Dow, 500 on the S&P 500 and 900 on the Nasdaq … or lower...

Stock markets hit new lows as economic weakness continues

Stock markets fell last week, with several markets closing at multi-year lows last Friday and threatening a renewal of the downtrend seen in 2008.

After falling dramatically for much of 2008, most stock markets had seemingly found a bottom around October or November and been moving sideways since then. This had provided hope to investors that stocks might be forming a bottom.

However, last week, several major stock market indices broke the sideways pattern to the downside, putting hopes that they have found a bottom under serious threat. In the United States, the Dow Jones Industrial Average fell 6.2 percent last week to close at 7,365.67 on Friday, its lowest close in six years. In Europe, the Dow Jones Stoxx 600 Index fell 7.5 percent to close at 176.93, its lowest close in almost six years. In Japan, the Topix fell 1.6 percent to 739.53, its lowest close in 25 years.

The breakdown in these indices occurred at a time when it was becoming obvious to investors that the global economic downturn accelerated at the end of 2008 and is likely to get worse before it gets better.

According to a report from the Organisation for Economic Co-operation and Development on 18 February, gross domestic product in the countries belonging to the group fell by 1.5 percent in the fourth quarter of 2008, the largest fall since OECD records began in 1960. Deterioration was seen in almost all the member countries for which data was available on that date, including in the United States, the euro area and Japan.

Quarterly percentage change in real GDP
	2008
	Q3	Q4
OECD - Total	-0.2	-1.5
United States	-0.1	-1.0
Euro area	-0.2	-1.5
Japan	-0.6	-3.3

The contraction in the OECD economies will almost certainly persist in at least early 2009. An earlier report from the OECD showed that the composite leading indicator for the group had fallen by 1.1 point in December, not much better than the rate of decline in the previous three months. Indeed, the accompanying chart shows that the composite leading indicators for the OECD as a whole and the major economies have been plunging since around the middle of 2008. According to the OECD, the composite leading indicators in most OECD countries have fallen to levels that were last seen during the oil shocks of the 1970s.

Other data mostly corroborate the tough outlook ahead.

A report from the Economic and Social Research Institute last week showed that its composite leading index for Japan continued to plunge at the end of last year. It fell to 80.0 in December from 81.8 in November.

In Europe, a composite index of business activity based on a survey of purchasing managers by Markit Economics fell to 36.2 in February, a record low, from 38.3 in January, based on a preliminary estimate. The manufacturing index fell to 33.6 in February from 34.4 in January while the services index fell to 38.9 from 42.2, both falling to the lowest on record.

The Conference Board's leading index for the US economy, though, did register an increase in January of 0.4 percent. However, over the past six months, the index was down 1.9 percent.

Of course, the stock market itself is a leading indicator of the economy, and if recent market movements are any indication, investors may be bracing themselves for more economic weakness ahead.

Dow falls to six-year low, BoJ to buy corporate bonds

US stocks fell again on Thursday. Bloomberg reports:

U.S. stocks dropped, sending the Dow Jones Industrial Average to a six-year low, as Hewlett-Packard Co. cut its profit forecast and concern about rising credit-card defaults dragged financial shares to the lowest level since 1995...

The S&P 500 slid 1.2 percent to 778.94, extending its 2009 loss to 14 percent in its worst start to a year. The Dow dropped 89.68 points, or 1.2 percent, to 7,465.95, the lowest since October 2002. The Russell 2000 Index declined 1.5 percent.

Among economic data released on Thursday, US producer prices rose more than forecast in January. Other data, however, indicate that the economy remains weak. Bloomberg reports:

Wholesale costs rose 0.8 percent, with prices excluding food and fuel advancing 0.4 percent, the Labor Department said today in Washington. The department also reported that the number of Americans collecting unemployment benefits surged to 4.99 million two weeks ago...

Rising joblessness argues against continued price increases. Total unemployment benefit rolls surged by 170,000 in the week ended Feb. 7, according to Labor, and first-time applications were unchanged at 627,000 last week, higher than economists projected...

The Fed Bank of Philadelphia’s general economic index dropped to minus 41.3 this month, lower than forecast, compared with minus 24.3 in January, the bank said today. Negative numbers signal contraction. Measures of employment and sales plunged to the lowest levels since the Philadelphia Fed’s records began in 1968.

It wasn't all negative though.

[A] surge in the supply of money...spurred a bigger-than-forecast gain in the Conference Board’s index of leading economic indicators in January. The gauge rose 0.4 percent, the most since December 2006, the New York-based research group said today.

The surge in money supply is of course the result of Fed efforts to inject liquidity into the financial system. The Bank of Japan is moving along similar lines. From AFP/CNA:

Japan's central bank on Thursday announced new measures to tackle a deepening recession in Asia's biggest economy as it left its super-low interest rates unchanged for a second month.

The Bank of Japan said it would maintain its key lending rate at 0.1 per cent.

At the same time it announced plans to buy up to one trillion yen (10.7 billion dollars) of corporate bonds from commercial banks as part of efforts to fight a credit crunch.

It also extended some of its existing emergency measures to keep credit flowing to struggling companies, just days after data showed the Japanese economy suffered its worst quarterly contraction since 1974...

The BoJ said earlier this month that it would buy one trillion yen (10.8 billion dollars) worth of shares held by commercial banks in an effort to keep credit flowing to cash-strapped companies.

Taiwan enters recession, US manufacturing and housing collapse

Another rate cut on Wednesday, this time from Taiwan. Bloomberg reports:

Taiwan’s central bank cut interest rates to a record low after the economy shrank an unprecedented 8.36 percent in the fourth quarter as exports and business investment tumbled.

Governor Perng Fai-nan and his board pared the discount rate on 10-day loans to banks to 1.25 percent from 1.5 percent in Taipei today, the seventh reduction since late September. The decline in gross domestic product from a year earlier was the biggest since official records began in 1952, and exceeded the 6.82 percent drop forecast in a Bloomberg survey of economists.

Taiwan entered its first recession since the technology bubble burst in 2001 as the global economic slump reduced demand for Taiwan Semiconductor Manufacturing Co. computer chips and Quanta Computer Inc. laptops. The central bank will pump money into the economy if Taiwan’s lenders fail to provide more credit to businesses, Perng said...

Taiwan’s economy will shrink 2.97 percent this year, the government forecast today, reversing its November estimate of 2.12 percent growth.

It doesn't help export-dependent Taiwan that the US economy continues to deteriorate. From Bloomberg on Wednesday:

The Federal Reserve’s industrial production index dropped 1.8 percent to 101.3, the lowest level in more than five years, the central bank reported today in Washington. Housing starts plunged 17 percent to an annual rate of 466,000, the fewest since records began in 1959, Commerce Department data showed...

The report from Commerce showed building permits, a sign of future construction, dropped 4.8 percent to a 521,000 annual pace.

The US government is doing its bit to help the housing market.

... President Barack Obama pledged $275 billion in a program that includes cutting mortgage payments and encourages loan modifications to keep Americans in their homes...

But in the meantime, deflationary pressure is building.

A third report today showed prices of goods imported into the U.S. fell in January for a sixth consecutive month on lower commodity costs and slumping demand. The Labor Department’s import-price index decreased 1.1 percent last month after a 5 percent drop in December. Prices were down 12.5 percent from January 2008, the most since records began in 1982.

The Fed aims to arrest the price trend.

Fed officials introduced a long-term U.S. inflation estimate, with most officials aiming to anchor public expectations at a 2 percent rate, according to minutes of the central bank’s Jan. 27-28 meeting released today in Washington. Some officials saw a risk of broad price declines, a pattern that could worsen the recession by making debts harder to repay.

Japanese economy in "worst ever crisis" in post-war era

Not for the first time, the deterioration in the Japanese economy is being described in stark terms. AFP/CNA reports the fourth quarter GDP data.

Japan's economy shrank at an annualised pace of 12.7 per cent in the fourth quarter of 2008 - its worst performance since 1974 - as the recession deepened, official figures showed Monday.

Asia's largest economy contracted by 3.3 per cent in the three months to December from the previous quarter as exports and factory output slumped due to the global economic crisis, the government said.

It was a third straight quarter of negative economic growth for Japan, which is in the midst of its first recession in seven years...

"This is the worst ever crisis in the post-war era. There is no doubt about it," Economic and Fiscal Policy Minister Kaoru Yosano said.

And the deterioration in the GDP is likely to get worse in the current quarter. From Bloomberg:

Japan’s economy may shrink at an annual 20 percent pace this quarter, the steepest drop in the postwar era, according to the Japan Research Institute...

The institute’s forecast for the three months ending March was based on a Trade Ministry survey that showed manufacturers planned to cut output by 9.1 percent in January and 4.7 percent this month. Production plunged a record 9.8 percent in December from a month earlier, revised ministry figures showed today.

Eurozone economy shrinks, US consumer confidence falls

The eurozone economy shrank in the fourth quarter. Bloomberg reports on Friday:

Gross domestic product in the euro region declined 1.5 percent from the previous three months, the European Union’s statistics office in Luxembourg said today. That was more than the 1.3 percent economists expected and the most since euro-area GDP records began in 1995. From a year earlier, GDP fell 1.2 percent in the fourth quarter, the only full-year drop on record.

In the US, the economy looks as though it is continuing to deteriorate in the current quarter. From Bloomberg:

Confidence among U.S. consumers approached its lowest level since 1980 this month after job losses mounted and the slide in home values deepened.

The Reuters/University of Michigan preliminary index of consumer sentiment fell for the first time in three months, to 56.2. The gauge reached a low of 55.3 in November.

Thursday's positive report on retail sales is looking like an anomaly.

The Commerce Department yesterday said retail sales unexpectedly halted a six-month slide in January, helped by spending on items such as clothing and food and higher prices for gasoline that boosted receipts at filling stations. Economists said the gains may not last, citing reports from other retailers and ongoing job losses.

Indeed, another report on Thursday had pointed to continuing job losses.

Reports point to further job losses. The number of Americans on unemployment-benefit rolls rose to 4.81 million in the week ended Jan. 31, the Labor Department said yesterday.

Trade falls in the US and China

Bloomberg reports that the US trade deficit narrowed in December.

The U.S. trade deficit narrowed in December to the smallest in almost six years, with both exports and imports declining for the fifth straight month as consumers worldwide pulled back their spending.

The gap between imports and exports shrank 4 percent to $39.9 billion, from a revised $41.6 billion deficit in November that was wider than previously estimated, the Commerce Department said today in Washington...

Imports in December dropped 5.5 percent to $173.7 billion, the lowest since September 2005, from $183.9 billion the prior month...

Exports in December fell 6 percent to $133.8 billion...

After eliminating the influence of prices, which yields the numbers used to calculate gross domestic product, the trade deficit widened to $43.3 billion from $40.1 billion.

Meanwhile, China also reported big falls in trade. From AFP/CNA:

China's exports fell 17.5 per cent in January from a year earlier, customs authorities said Wednesday, marking the sharpest drop in more than a decade.

The country's trade surplus remained high at US$39.1 billion, due to an even steeper drop in imports, which plunged 43.1 per cent year-on-year, according to customs data.

The weakening in the trade statistics came amid falling demand in key overseas markets and a general reduction in activity caused by the Lunar New Year holiday period, which began in January.

US Treasury unveils rescue plan, markets unimpressed

On Tuesday, the US Treasury announced its latest plan to rescue the financial system. MarketWatch reports:

In its latest effort to stabilize the broken financial system, the U.S. government will use mostly private money to create a fund of at least $500 billion to recapitalize banks and another fund of $1 trillion to support consumer and business lending, Treasury Secretary Tim Geithner announced Tuesday.

As part of the plan, all major U.S. banks will be required to undergo a rigorous stress test to determine if they can survive a more severe economic downturn. If they can, they'll be eligible for government capital.

Apparently, though, markets weren't too impressed by the plan. From Bloomberg:

U.S. stocks fell, sending the Standard & Poor’s 500 Index to its biggest drop since Barack Obama’s inauguration, while Treasuries rallied on skepticism that the government’s bank rescue will work. The dollar and gold rose.

Bank of America Corp. and Citigroup Inc. slipped more than 15 percent after Treasury Secretary Timothy Geithner said he’s still “exploring a range of different structures” to bail out lenders...

The S&P 500 Index dropped 4.9 percent, the most since Jan. 20, to 827.16. The Dow average decreased 381.99 points, or 4.6 percent, to 7,888.88. Ten-year Treasury notes rose, driving their yield down by 0.16 percentage point to 2.82 percent. The dollar gained 0.8 percent against the euro, and gold rose 2.4 percent as investors sought havens.

In other government action on Tuesday, the US Senate approved President Barack Obama's stimulus package. Bloomberg reports:

The U.S. Senate approved an $838 billion economic stimulus package, clearing the way for negotiations with the House over a compromise plan that President Barack Obama wants lawmakers to send him within days.

The Senate today voted 61 to 37 to approve its measure. The bill provides $293 billion in tax cuts and more than $500 billion in new spending that the legislation’s supporters call critical to preventing the economy from sinking deeper into recession.

China's inflation rate approaches zero

Inflation fears have completely vanished in China. From AFP/CNA:

Chinese inflation slowed further in January as activity in the world's third-largest economy weakened, government data showed Tuesday, with economists warning deflation was imminent.

The consumer price index, the main gauge of inflation, was 1.0 per cent in January, down from 1.2 per cent in December, the National Bureau of Statistics said Tuesday...

In an ominous sign of things to come, producer prices, which measure trends at the wholesale level, fell by 3.3 per cent in January, the state-run Xinhua news agency said.

In other news on China today, the country reportedly overtook the US as the largest auto market in January. AFP/CNA reports:

A total of 735,000 automobiles were sold in China last month, state television said, citing Dong Yang, deputy director of the China Association of Automobile Manufacturers.

By contrast, 656,976 vehicles were sold in the United States, according to preliminary estimates issued last week by market research firm Autodata.

However, analysts said January was an unusual month because the Lunar New Year boosts sales in China as the United States sees a post-Christmas drop, and for the full year the US was expected to remain the world's largest market.

Japan faces worst recession in half a century

There was more bad news for Japan today. From Bloomberg:

Orders for Japanese machinery fell for a third month in December and bankruptcies increased as businesses scrapped investment plans amid a collapse in exports and deteriorating earnings.

Bookings slid 1.7 percent from November, when they fell 16.2 percent, the sharpest drop since the survey started in 1987, the Cabinet Office said today in Tokyo. Corporate bankruptcies rose 15.8 percent to 1,360 cases in January, the eighth monthly increase, Tokyo Shoko Research Ltd. said in a separate report...

Japan’s current-account surplus narrowed 92 percent in December as exports slumped, the Finance Ministry said today. Overseas shipments fell a record 35 percent, causing the surplus to shrink for a 10th month, the report said...

Manufacturers are likely to delay or halt investment in capacity because of the slump in demand, the Bank of Japan’s chief economist said today. The economy is deteriorating at a pace unseen in the past half century, Kazuo Momma, head of research and statistics at the central bank, said in a speech.

There was one positive piece of data.

... A separate report today showed an index of sentiment among Japanese merchants rose to 17.1 in January from a record low of 15.9 a month earlier.

The latter, though, contrasts with a Friday report that showed that the index of leading economic indicators fell 2.0 points to 79.8 in December.

More gloomy economic data to end the week

Bloomberg reports another big fall in US employment.

The jobless rate rose to 7.6 percent from 7.2 percent in December, the Labor Department said today in Washington. Payrolls fell by 598,000, the biggest monthly decline since December 1974. Losses spanned almost all industries, from construction and manufacturing to retailing, trucking, media and finance...

With revised declines of 577,000 for December and 597,000 for November, revisions subtracted 66,000 workers from previously reported figures for the last two months of 2008. The 3.57 million jobs lost since the recession started in December 2007 marks the biggest employment slump of any economic contraction in the postwar period.

This means consumer spending is likely to be hurt, especially as consumer credit is also shrinking. From Bloomberg:

Consumer credit fell by $6.6 billion, or 3.1 percent at an annual rate, to $2.56 trillion, according to a Federal Reserve report released today in Washington. In November, credit decreased by $11 billion, more than previously estimated and the biggest drop since records began in 1943.

North of the border, jobs are also being lost. From Bloomberg:

Canada lost a record number of jobs in January, pushing the unemployment rate to a four-year high of 7.2 percent, as companies struggle to cope with the country’s first recession since 1992.

Employers cut a net 129,000 workers, three times the loss forecast by economists, after a drop of 20,400 in December, Statistics Canada said today in Ottawa. It was the largest drop since the methodology for the survey was changed in 1976.

Meanwhile, across the Atlantic, industrial production is falling. Bloomberg reports the fall in German industrial output in December.

Output fell a seasonally adjusted 4.6 percent from November, the biggest decline since records for a reunified Germany began in January 1991, the Economy Ministry in Berlin said today. It was the fourth straight monthly drop and almost twice the 2.5 percent retreat forecast by economists in a Bloomberg survey.

Reuters reports that factories in the UK suffered the biggest slump in production in nearly 35 years at the end of last year.

The Office for National Statistics said industrial production fell 4.5 percent in the three months to December -- the biggest drop since 1974 when the government imposed a three-day working week because of energy shortages during the coal miners' strikes.

Production fell 1.7 percent on the month in December, leaving it 9.4 percent down on a year ago -- the largest annual decline since January 1981...

Manufacturing output dropped 2.2 percent on the month and 5.1 percent on the quarter -- matching the record low set in the first quarter of 1974.

Investors are looking past the gloomy data though. The S&P 500 rose 2.7 percent on Friday while the Stoxx 600 gained 2.1 percent.

BoE moves closer towards ZIRP

The Bank of England took another step towards zero rates on Thursday. Times Online reports:

The Bank of England pushed deeper into uncharted territory yesterday in its fight against deepening recession, cutting interest rates to 1 per cent – the lowest in its 314-year history. The move to reduce rates by another half-point was the fifth cut in five months that have marked a fall from 5 per cent...

Explaining its decision to reduce rates again, the Bank painted a bleak picture of the state of the economy, which, official figures say, shrank by 1.5 per cent in the previous quarter.

The Bank said that it now expected a similar slump in national income in the present quarter, with the world in the throes of what it called a “severe and synchronised downturn”.

Confidence among households and businesses was sinking, while companies and families faced a continued credit drought, it added. As a result, it said, consumer spending was weak while businesses were slashing jobs and drastically cutting investment.

Ironically enough, the day also brought positive data on the UK economy.

As fearful consumers retreat from the high street and homeowners fret over plunging property values, there was some respite from the deluge of bad news yesterday as Halifax, the nation’s biggest mortgage lender, reported that house prices ticked upwards last month.

House prices rose by 1.9 per cent in January as bargain hunters snapped up cheap properties. However, prices are still 17 per cent lower than January last year.

In contrast, the data out of Germany remained negative on Thursday. From Bloomberg:

Manufacturing orders in Germany, Europe’s largest economy, dropped more than economists expected in December, extending the worst decline on record.

Orders, adjusted for seasonal swings and inflation, fell 6.9 percent from November, the Economy Ministry in Berlin said today. That’s adding to the biggest slump since data for a reunified Germany was first compiled in 1991...

From a year earlier, orders slumped 25.1 percent...

But the deterioration in the economy in Germany and elsewhere in the eurozone did not move the ECB to cut rates on Thursday. From Bloomberg:

The European Central Bank kept interest rates unchanged after four reductions since early October as officials gauge the severity of the recession before cutting borrowing costs again.

Policy makers meeting in Frankfurt left the benchmark lending rate at 2 percent...

Nevertheless, central bank rates are clearly on the downtrend. From another Bloomberg report on Thursday:

European Central Bank President Jean- Claude Trichet signaled policy makers may cut their benchmark interest rate by half a percentage point to a record low of 1.5 percent next month as a recession in the euro region deepens.

“I don’t exclude that we could reduce interest rates at our next decision,” Trichet said at a press conference in Frankfurt after leaving the key rate at 2 percent today...

Central banks in South Africa and the Czech Republic joined the U.K. in cutting interest rates today to fight the global slump. South Africa’s central bank cut its benchmark rate by 1 percentage point, the biggest reduction in more than five years, to 10.5 percent. The Czech central bank lowered the key rate for the third consecutive time, by half a point to 1.75 percent.

There is practically no more room for rate cuts in the US though, even as the economy continues to head south. From Bloomberg:

Initial applications for unemployment benefits climbed more than forecast to 626,000 last week, a Labor Department report showed today in Washington. Productivity, a measure of employee output per hour, rose at a 3.2 percent annual rate in October to December as employers cut 1.5 million from payrolls and slashed working hours by the most since 1975, the department said...

A separate Commerce Department report today showed that orders placed with U.S. factories fell for a fifth month in December as domestic and international demand crumbled. Bookings tumbled 3.9 percent, more than forecast, after a 6.5 percent drop in November. Excluding transportation equipment such as cars and aircraft, orders fell 4.4 percent after a 6 percent decrease.

Not all negative

While the global economy is undoubtedly weak, not all the recent data have been negative.

On Monday, we saw a rise in the manufacturing PMIs in some of the major economies.

Tuesday brought us news that US pending home sales rose 6.3 percent in December.

Wednesday brought us news that the ISM non-manufacturing index rose in January. Employment, however, continued to fall. From Bloomberg:

The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 42.9, still below the reading of 50 that signals contraction...

Companies in the U.S. cut an estimated 522,000 jobs in January, a 12th consecutive reduction, a report from ADP Employer Services today showed...

The economy won’t stabilize “until we see employment start leveling off to where it’s not in that freefall,” ISM’s Nieves, said in a conference call with reporters. “I’m not seeing anything that’s instilling confidence.”

The euro area also saw an improvement in its services index, the PMI rising to 42.2 in January from 42.1 in December, but eurozone retail sales fell 1.6 percent in December from a year earlier.

Similarly, in the UK, the service sector PMI rose to 42.5 in January from 40.2 in December but the Nationwide consumer confidence index fell 8 fell points to 40.

However, as in manufacturing, Japan proved the exception with regards to the improvement in PMIs among the major economies. The Nomura Japan Services Purchasing Managers Index fell to 34.1 in January from 37.0 in December.

Meanwhile, outside the G-7, there have been more interest rate cuts recently. Australia cut rates on Wednesday, and on Thursday, we had rate cuts from Norway, Indonesia and Romania.

Amid weak US economic data, manufacturing PMIs rise

The economic reports from the US on Monday were generally weak. Reuters reports:

U.S. factory activity contracted at a slower pace in January as credit markets improved, data showed on Monday, but the general picture remained one of an economy sliding deeper into recession.

While news that the Institute for Supply Management's index of national factory activity rose to 35.6 from a nearly three-decade low of 32.9 in December gave some faint hope for the embattled economy, other reports painted a bleak image...

According to a closely watched quarterly survey of lending conditions by the Fed, a majority of domestic and foreign banks tightened lending standards to businesses and households over the last three months...

Consumer spending fell by 1 percent in December, a sixth straight monthly decline, after dropping by 0.8 percent in November. With companies cutting down on hours and reducing payrolls, incomes fell by 0.2 percent after November's 0.4 percent decline.

On an inflation-adjusted basis, consumer spending fell 0.5 percent during the month...

In a separate report...spending on construction projects dropped 1.4 percent last month, the biggest decline since July. For 2008, construction spending plunged by a record 5.1 percent.

Elsewhere, the deceleration in the manufacturing contraction was evident in Europe as well. The Markit Eurozone Manufacturing purchasing managers' index rose to 34.4 in January from 33.9 in December while the UK PMI rose to 35.8 in January from December's 34.9

There was improvement in Asia too with the CLSA China Purchasing Managers’ Index rising to 42.2 in January from 41.2 in December, although the news in Asia was marred by South Korea reporting a record 32.8 percent fall in exports in January from a year earlier.