Data signal deep global downturn

[Nostalgia]

Evidence of a global slide towards a deep recession mounted on Monday with severe strain reported by manufacturing companies around the world, large falls in car sales across Europe and bad construction figures in the US.

So clear were the signs of downturn in the US that the National Bureau of Economic Research, the most prestigious US independent economic authority, said the country had been in recession since December 2007.

The gloom prompted a near 9 per cent fall in the S&P 500 index, reversing gains made last week, while the 10-year Treasury yield fell to its lowest level for more than half a century.

The NBER academics define a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators”.

But Ben Bernanke, US Federal Reserve chairman, sought to allay concerns that the US was entering a period of economic stress on par with the Great Depression. “Let’s put that out of our minds,” Mr Bernanke said in a speech in Austin, Texas. “There’s no comparison in terms of severity.”

Mr Bernanke surprised the bond market by saying the central bank may purchase “substantial quantities” of US Treasuries in the open market, suggesting that the Fed must use other means to stimulate the economy as conventional interest rate policy becomes constrained.

His remarks prompted a sharp decline in Treasury yields, with the yield on the 10-year note falling to a low of 2.66 per cent, down from 2.84 per cent before Mr Bernanke started speaking. The 10-year yield is at its lowest level since 1955.

Surveys of manufacturing orders in the US, Europe and China published on Monday were much weaker than expected. In China, the purchasing managers index compiled by the government-linked China Federation of Logistics and Purchasing fell from 44.6 in October to 38.8 last month, the lowest reading since the series started in 2005.

The eurozone manufacturing PMI figures also hit a series low. In the US, equivalent data from the Institute for Supply Management showed manufacturing activity suffered a further slowdown last month to a 26-year low.

New car sales slumped across the world, including a near 50 per cent fall in Spain.

The global weakness hit equity markets with FTSE Eurofirst 300 falling 6 per cent. The S&P 500 index fell 8.93 per cent to close at 816.21.

Volatility also reigned on the currency markets. Of particular concern was the Chinese central bank’s announcement of a relatively big one-day drop in the value of the renminbi against the US dollar.

http://www.ft.com/cms/s/0/edaeb336-b...0779fd18c.html

[ZingPao]

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Seriously, Bernanke makes me think of this kind of stuff. Now back to the topic.