It's a new year in financial markets and a folded chapter on the devastation that was seen in financial markets and especially equities in the belated year, yet still as we talk the talk and walk the walk of new beginnings the facts are still the same we are in recession and heading to a global meltdown as well and to start this year manufacturing data are queued from major economies, proving that the economic turmoil is ongoing and reminding us of the horrific fourth quarter that has passes!
As global demand waned and domestic consumption increased the intensity of the slowdown the manufacturing sector across industrial nations only deepened its recession to add more downside pressures to an extending recession. Assessing the major economies Japan and the Euro Zone have officially started the recession with consecutive quarters of contraction while the United States and UK have entered their recession as well with deepened GDP contraction to be seen the last three months of the year, as the fourth quarter was the most appalling performance for economies and the global community as well as the burst of new rounds of intensified credit conditions only crippled the path further.
Capital investments, durable goods and autos are mostly very sensitive to economic conditions, and as the slowdown increased especially that recession in the auto sector that was seen live in the US with the major auto giants bailed out by federal loans conditions across were not much better.
Japanese auto giants Toyota and Honda had their share of the agony and downgraded expectations for this year to come in line with French automakers as well that were some of the leading worst performers among blue-chip stocks as both Renault SA and PSA Peugeot Citroen lost more than half their value.
Contraction dominates the manufacturing sectors across economies and Europe and the US today might only prove that the sector's performance is only sinking further which pressures the economic wheel even slower and threatens with the shed of thousands more jobs.
Starting with Germany and the Euro Zone the PMI manufacturing is expected unrevised at 33.5 and 34.5 respectively especially that Germany the area's largest has dried up exports market as is the leading economy in the zone and the major driver of its recession.
Neighboring UK is not expected any different as their economy is merely deepening a cold and harsh recession; their manufacturing sector that accounts for nearly 15% of the economy is also hit by the ongoing tight credit conditions, recession in its major export markets especially the EU nations that account for nearly half of UK's exports that sterling's depreciation did not help much to improve. CIPS PMI manufacturing index is expected to have deepened the contraction in December to further record low at 33.6 from 34.4.
Along side that misery the housing market's performance that was a major driver to the recession as their property bubble also burst following that of the US and the tight lending and credit conditions with of course the rising unemployment is only denting the sector further. Mortgage approvals in November are expected to have continued to consolidate at their record low levels of 32 thousands, while house prices according to HBoS only continued to slump further in the last month of the year to deepen the drop and exceed the 10% maximum drop for this year which was heavy on the sector.
The US economy, that was the source of all the agony and though did post impressive growth figures in the first half of the year, they were only hiding the truth of the recession as exports drove the expansion while domestically the economy was and still is crumbling; while starting the latter half of the year and the slump in global demand and the strengthening dollar the performance took a turn and the manufacturing sector deepened its contraction as exports were no longer a backbone support.
According to the ISM Manufacturing for December it is expected to have contracted further to 35.4 from 36.2 the previous month, while prices paid that surged to records in the first half of the year with the commodities boom is to slow further to 20 from 25.5 assuring the fears for the Feds regarding the economy to suffer a phase of deflation and they have already started on taking preemptive liquidity flooding measures to prevent that from happening.
The sector's deepened contraction can only mirror yet another horrific jobs report for the ending of 2008 that we are to see next week. Until November the economy has lost almost 1.91 million jobs and still counting, as the recession deepened and that powered more contraction especially that domestic consumption suffers the ongoing slump and it accounts for 2/3 of the economy!
A new year it is yet here we are walking the path we dread and surely the woes of 2008 are to take us to start the new year and at least will linger for its first half though I'm sure that markets are not to have as worse of a year as last one and so far one can only project...