Global recession moved closer on Friday after some poor figures from Japan and Europe, while more gloom percolated out of China.
Japanese industrial production and retail sales slumped, Eurozone unemployment jumped sharply (the biggest rise in more than a decade) to a two year high and Sweden became the latest European economy to fall into recession.
Japan’s industrial output tumbled 3.1% in October. It had risen 1.1% in September. Consumer spending dropped 3.8% as well, the eighth successive monthly fall.
Industrial production dropped 7.1% in the year to October.
The Trade Ministry had even gloomier news in the detail of the output report.
The Trade Ministry said Japanese companies planned to cut production 6.4% in November, the worst since the survey began in 1973, and a further 2.9% this month. That’s a fall of 12% if the forecasts are met.
Analysts expressed surprise at the speed of the fall in production and Bloomberg reported Richard Jerrams, Macquarie’s Chief economist in Tokyo as saying: “It’s absolutely unprecedented for production to show a 12% drop from September to December. That basically tells you that export demand has collapsed.”
The worry from the figures was the sharp fall in the transportation sector: that’s cars.
Toyota has already forecast that its full year profit in the March 2009 year will fall by almost 70%. Toyota said on Thursday that it slashed production in October by 17%.
Honda Motor Corp, Japan’s second biggest car maker, has forecast it may not make a profit in the second half of the year and it slashed production by 40,000 units last week. Nissan is cutting back, along with truck groups.
General machinery and electronic parts and devices were also very weak (reflecting in part the slump in consumer electronics, as seen by Panasonic slashing its operating profit for the 2009 year by 40% and its overall profit by 90%).
Japanese bankruptcies have been rising, with the number of listed companies filing for bankruptcy protection hitting a post-war high of 30 so far this year.
Household spending dropped 3.8% in the year to October, the largest decline since late 2006.
Like the US and Europe, inflation is rapidly disappearing in Japan: the consumer price index rose 1.9% year-on-year in October, 0.4% slower than September’s rise.
Japan’s Ministry of Labour reported that 30,000 non-regular workers would lose their jobs between October and next March.
The unemployment rate improved to 3.7% compared with 4%, but analysts said the fall represented discouraged people who had given up looking for work.
India, another of the so-called BRICs (Brazil, Russia, India and China, the four major emerging markets) said its economic growth slowed to 7.6% in the third quarter of 2008 from 7.9%. The news was overshadowed by the terror attacks in Mumbai.
Eurozone unemployment saw its biggest monthly jump in 15 years, increasing the chances of a another big cut in European Central Bank interest rates later this week.
Unemployment in the 15-country region soared by 225,000 in October: At 7.7%, October’s eurozone unemployment rate was the highest for almost two years.
Eurozone annual inflation fell from 3.2% in October to 2.1% in November. It was the biggest monthly fall in inflation since the launch of the euro in 1999.
Eurozone inflation peaked at 4% in July.
In Russia, the central bank raised its key refinancing interest rate again to 13% from 12% on Friday to support the weak rouble.
South Korea saw industrial production fall 2.3% in October, mirroring the experience of Japan.
Sweden fell into recession in the third quarter after its economy contracted 0.1% after a similar contraction in the June quarter.
It joins Ireland, Italy and Germany as European Union members now in recession. New Zealand, Japan and Denmark are other economies also in recession.
In Spain, the collapse of the once-booming home building and property sector continued. The collapse has pushed Spain to the brink of recession.
Major developer, Habitat filed for creditor protection and its rival, Colonial, said it was in risk of following.
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China’s State Information Centre lowered its growth forecast to 8% for the December quarter from 9% in the December quarter, a significant slowing from 2007′s 11.9%.
The person issuing the downgrade was significant: one of China’s senior state economic officials, Zhang Ping, chairman of the National Development and Reform Commission.
He appeared at a rare press conference in Beijing on Thursday evening to update the media on the health of the Chinese economy.
He said the impact of the global financial crisis on China has not stopped.He made similar comments over the weekend.
The downturn in the Chinese economy had accelerated over the past month and could lead to high unemployment and social unrest.
He said the government needed to take “forceful” measures to limit the slowdown in the economy, which included the 1.08% cut in interest rates by the central bank.
“The global financial crisis has not bottomed out yet. The impact is spreading globally and deepening in China. Some domestic economic indicators point to an accelerated slowdown in November,” Mr Zhang said on Thursday at a rare news conference, according to Bloomberg and Reuters.
“Excessive production cuts and closures of businesses will cause massive unemployment, which will lead to instability,” Mr Zhang said.
“Some economic indicators weakened further in November, showing a faster decline,” Zhang Ping said. “Employment is being impacted by factory closures and many migrant workers are returning to their home towns.”
Mr Zhang said that the extra spending would add about 1 percentage point to economic growth next year, less than most private sector economists had forecast.
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