The global manufacturing recession continued in April, with rates of contraction for output, new orders and employment all showing what are effectively sharp contractions by historical standards. The rates of contraction however moderated almost universally, and this is now the fourth month where this moderation has been evident. Thus, while the contraction is far from over, it is reasonable to say the it has stabilised, and the big issue is at what rate it will hold in the months to come. The initial shock has now been absorbed, but that is a far cry from saying that we already have the worst behind us. The general deterioration in employment conditions raises the concern that as the impact of the government stimulus “shocks” in their turn wane, and as national banking systems come under the impact of the additional loan defaults the growing unemployment and falling property values will cause, then we may see a series of second round effects, not as severe as the initial “hit” last October, but certainly not to something to be taken lightly or “factored out of the picture” at this point. Continue reading →

Data from the JPMorgan March Global PMI provide solid evidence that the speed of contraction in global manufacturing is lessening at the present time. Indexes tracking trends in output and new orders generally continued to rise across the globe, and are in general now up significantly from the series lows registered at the end of 2008. However, both the output and the new orders indexes remained at very low levels, all still signalling continuing contraction and well below those consistent with anything resembling a recovery in either component. Continue reading →

The news coming out of Estonia is obviously none too good at the moment. This morning we learnt that both Estonian industrial production and retail sales plunged at the most rapid rate on record in February, giving us very clear evidence that the recession is now deepening. Industrial output (adjusted for working days) fell an annual 30 percent, the biggest drop since 1995, following a 27 percent drop in January, while retail sales, excluding cars and fuel, fell 18 percent, the most since 1994. Month on month, output fell a seasonally adjusted 3.5 percent. And the situation is hardly likely to improve in the short term, since, as Danske Bank point out, all Estonia’s main partners are themselves now in deep recessions, so the possibilities of an uptick in activity – even were the economy competitive – are really pretty restricted.

“Industrial production is in freefall, and we expect a continuation of this trend in 2009,” Danske Bank A/S said in a note ahead of the report. “Only an improved outlook for Estonia’s main trading partners, Finland, Sweden, Germany, could change this trend, but this is hardly feasible before the beginning of 2010.”

In fact, while the crisis is a general one, some countries are obviously faring far worse than others, and Estonia’s industrial production dropped the most in the entire 27-nation European Union in December and January. And even if things do start to pick up again elsewhere in 2010, it is hard to see the Estonian economy benefiting that much, since it will still be grappling with price competitiveness issues (see below).

Continue reading →

Japan’s economy certainly looks to be one of the worst case scenarios globally at the moment. Indeed, as Claus Vistesen puts it (in a very fine and thoroughly argued post – Engine Failure – that you can see here): “Final estimates from Q4 2008 suggested that Japan contracted at an annualized 12.1% which puts Japan in the dubious pole position of biggest GDP declines among industrialised economies.”

This record breaking negative performance seems in danger, not only of being repeated, but even of being surpassed, in the current quarter, since Japanese industrial output slid for the fifth month in a row in February as falling exports gradually took their toll on the entire conomy, with production being down 38.4% year on year. So, as we move towards the G20 meeting later this week, one thing is blindingly obvious: any decisions which don’t address the tricky question of how to get global trade moving again are going to fall well wide of the mark.

Continue reading →

Both the EU Economic Sentiment Indicator (ESI) covering the EU 27 and the eurozone only one declined again in March, though the pace of decline was slower than in the first two months of the year. The indicator fell by 0.6 points in the EU, and by 0.7 points in the euro area, to 60.3 and 64.6 respectively. As a result the indicators for both regions now stand at their lowest levels since the current series was launched in January 1985. Continue reading →

Ukrainian President Viktor Yushchenko speaking in the parliament yesterday (Tuesday) called for concerted action to reverse a drop of up to 30 percent in economic output which is in the process od destroying jobs and sinking living standards. Yushenko said the country was “ill-prepared to confront a crisis” which may have lead to a fall of 25-30 percent based on figures from January-February 2009. According to the Kyiv post:

The president urged politicians to end the rows which have thwarted reform efforts as Ukraine gears up for next year’s presidential election. He also proposed political change, including the creation of a second chamber of parliament. “We were ill-prepared to confront the crisis and its first blow was painful and difficult…,” Yushchenko told deputies.

“The consequence of this was a slowdown in GDP growth in 2008 to 2.1 percent…and a destructive fall of 25-30 percent according to figures from January-February 2009.”

Growth in the first two months of 2008 was 5.8 percent.

“Before the crisis, (annual) growth rates in the Ukrainian economy stood at 6.5-7.0 percent. I believe, I am certain that this indicator will be restored,” the president said.

“We have lost our foreign markets and 60 percent of Ukrainian exports. All our foreign currency earnings depended on these markets as did the jobs of nearly two million people in steel, chemicals and related sectors.”

Well having just quoted Claus to the effect that Japan’s economy was occupying pole position in the global contraction, I would now readily have to “correct” and admit that Ukraine are obviously playing in another league, and even though all statistics in Ukraine are “political statistics”, looking at the sort of data I’ve been looking at, the order of magnitude seems about right. The contraction is massive. And even though Ihor Burakovsky’s earlier estimate of a 12% annual contraction for the year now looks to be a little dated, that was an annual (ie all 2009) forecast, and may not be that far from the mark by the time we reach the end of the year. So with that in mind, and taking into account that we have little in the way of really new data at this point, I am simply upgrading and reposting my earlier post, for those who may not have seen it. Continue reading →