Industrial News from Europe

Add comment January 10th, 2009

Britain’s recession-hit manufacturers slashed production in November at the fastest pace since the mid-1980s, leaving output below the level when Labour came to power in 1997 and signalling a severe contraction in the economy in the final quarter of the year.

Official figures released yesterday showed that manufacturing production declined by 2.9% in November. Excluding summer 2002, when celebrations for the Queen’s golden jubilee caused a short-lived slip, that made it the weakest month since June 1985.

“As has been the case in many other economies, industrial activity in the UK has now fallen off a cliff,” said Paul Dales, of consultancy Capital Economics. He added that in total output had dropped by 7.8% from its peak, to a level last seen in 1995. “In other words, 14 years of gains in activity have been wiped out in just nine months.”

Industrial production, which includes mining and energy as well as manufacturing, fell 2.3% in November, to a level 6.9% lower than the same month in 2007.

The fresh evidence of the parlous state of British industry will intensify demands for action from the government to support threatened firms and provide re-training for workers who lose their jobs. Gordon Brown will hold a “jobs summit” on Monday to outline his response to rapidly rising unemployment, and the Treasury is preparing a package of measures to unblock clogged credit markets.

Vince Cable, Treasury spokesman for the Liberal Democrats, said the scale of the decline in output raised fears that the manufacturing sector would be so severely gouged that it would be unable to benefit from rising demand and the cheap pound once the worst of the downturn is over.

“If the British economy is now going to be restructured, then the traded sector will have to have a larger role, and this is ominously not a good start,” he said. “We can’t have an economy that is based primarily on pyramid-selling schemes in the City and on finance: a return to more solidly based things like manufacturing has to be part of the mix.”

The worse-than-expected news from manufacturers underlined the speed at which the economy deteriorated in the final quarter of last year. The National Institute for Economic and Social Research said the fall in output pointed to a 1.5% contraction in GDP in the three months to December, which would make it the weakest quarter since 1980. The respected think tank added that there had only been five quarters in which output fell more sharply since quarterly GDP figures were first produced in 1955.

Steve Radley, chief economist at the EEF, said few sectors had escaped the downturn. “This is a sign that confidence has fallen right acoss the globe, and that all the major economies are affected,” he said. He added that further layoffs among distressed manufacturers were likely in the coming weeks, after the announcement of 1,200 job cuts at Nissan’s Sunderland plant last week.

Many carmakers announced longer-than-usual shutdowns over the Christmas holidays in response to a sharp decline in demand from consumers suffering from the credit crunch, but the new figures reveal that car production plunged by 21.7% in November, even before most of the emergency closures began.

The woes of British industry were echoed right across Europe in November, as firms slashed production amid plunging demand from consumers in all the world’s major markets.

Industrial production in Germany slumped by 3.1% in November, and in France it declined by 2.4%. Analysts at RBS said that on the basis of these gloomy figures, industrial output in the eurozone as a whole looked likely to have declined by about 4% in the final quarter of 2008.

Source: UK Guardian

Good News, Bad News: China Imports, Exports Tumble

Add comment January 10th, 2009

SHANGHAI — China’s exports and imports both fell for the second consecutive month in December, with an accelerated contraction in trade offering a bleak outlook for the world’s third-largest economy and highlighting the need for Beijing to rely more on potent fiscal stimuli.

The weak trade data, especially that of imports, showed China isn’t just suffering from a global economic slowdown but also from a deterioration in local demand, an engine that the authorities have hoped would keep the economy going and unemployment in check.

China’s exports in December fell 2.8% from a year earlier to $111.16 billion, while imports in the month fell 21.3% to $72.18 billion, a person familiar with the data said.

China’s trade surplus in December totaled $38.98 billion, the person said. That was down from a record $40.09 billion in November.

The fall in December exports was lower than the median forecast of a 3.8% drop by 12 economists surveyed by Dow Jones Newswires but was higher than the 2.2% decline in November, the first monthly drop since June 2001.

The rate of decline for imports in December was sharper than the 19.1% expected by the economists and the 17.9% fall in November, the first decline since February 2005.

While the falling value of imports in December partly reflects declining international commodity prices, it also indicates “a sharp deceleration of economic growth in the fourth quarter and poor growth momentum in the first quarter,” said Stephen Green, an economist at Standard Chartered Bank.

Machinery imports were weak in November and likely continued into December, showing that “there is a real downturn in domestic investment…and manufacturing,” he added.

Beijing’s recently unveiled four-trillion-yuan fiscal stimulus package, which will raise public spending on infrastructure and social welfare, will likely give some support to imports of commodities such as iron ore and metals this year, Mr. Green said.

The weak trend for imports could start stabilizing in the second half of this year as Chinese firms finishing running down their inventories and global commodities prices rebound, said Xu Jian, an analyst at China International Capital Corp.

China’s exports in 2008 rose 17.2% to $1.43 trillion and imports last year rose 18.5% to $1.13 trillion, said the person familiar with the trade data.

The country’s trade surplus in 2008 was a record $295.46 billion, the person said, up from 2007’s surplus of $262.2 billion.

The market had expected a 17.3% rise in 2008 exports, a 19.3% rise in imports and a full-year trade surplus of $289.2 billion, according to the survey of economists.

China’s exports will fall around 5% in 2009, extending the weakness from the past two months, said Mr. Xu.

Mr. Xu added that Beijing will likely raise export-tax rebates on more products and ease trade financing but is unlikely to use a weak yuan as a tool to help exporters.

As for China’s trade surplus, despite a narrowing in December, it stayed near historically wide levels. While ordinarily trade surpluses would be welcome, the performance in the past two months was of a different and worrying nature: the strong numbers were driven by a sharper decline in imports rather than faster growth in exports as in previous months and years.