Manufacturing index drops to 28-year low
Jan 2 01:22 PM US/Eastern
By ELLEN SIMON
AP Business Writer

In this Dec. 23, 2008 file photo, with the last Tahoe already moved off,...

NEW YORK (AP) - A gauge of manufacturing activity hit its lowest level in 28 years in December as the recession depressed every corner of industry, hurting companies from bakeries to cigarette-makers to aluminum smelters.

The Institute for Supply Management, a trade group of purchasing executives, said Friday its manufacturing index fell to 32.4 in December, a greater-than-expected decline from November's reading of 36.2. Wall Street economists surveyed by Thomson Reuters had expected the reading to fall to 35.5.

Components of the index hit historic lows. New orders fell to their lowest level on records going back to 1948. Prices fell as the number of respondents saying they had paid more in December than in November sank to its lowest monthly reading since 1949.

A reading for the overall index above 50 signals growth, while a reading below 50 indicates contraction. The index, based on a survey of the institute's members, has fallen steadily for the last five months as the economy deteriorated.

December's reading is the lowest since June 1980, when the economy was near the end of a six-month recession.

If December's rate of manufacturing activity were to persist for 2009, the nation's gross domestic product would show a 2.7 percent contraction, said Norbert Ore, chairman of the group's business survey committee. GDP, the broadest measure of economic activity, decreased at an annual rate of 0.5 percent in the third quarter of 2008, according to the Bureau of Economic Analysis.

Only three recessions in the history of the index have showed weaker manufacturing readings, said John Ryding, of RDQ Economics. Those recessions were in 1948 to 1949, 1973 to 1975 and 1980.

With European manufacturing indexes also dropping, "the case for a massive global fiscal stimulus continues to grow," Ryding said.

Investors shrugged off the grim report on the new year's first day of trading, eager to start fresh after the losses of 2008. Stocks were higher in midday trading, with the Dow Jones industrial average up 146.64, at 8,923.03. Broader indexes were also higher.

As the economy sputters through a recession that began in December 2007, no industry is proving resistant. No sector reported overall growth in December. Also, none reported growth in new orders, production, employment or prices, as businesses from tobacco to coal products to foodmakers saw declines.

Declining prices, coming after the summer's soaring market for commodities, have sent manufacturers—especially in chemicals and metals—reeling.

Century Aluminum last month cut production at a West Virginia plant and said that it might have to cease production at the plant entirely unless it cuts costs and prices stabilize. LyondellBasell Industries, the third-largest independent chemical company in the world, said Wednesday that while several lenders had allowed it to postpone $160 million in loan payments, a Chapter 11 bankruptcy filing might still be an option.

The summer's commodity bubble was devastating for many food processors. Pilgrim's Pride Corp., the nation's largest chicken producer, filed for Chapter 11 bankruptcy protection on Dec. 1.

With the overall unemployment rate at 6.7 percent in November, the highest in 15 years, manufacturing continues to be one of the hardest hit sectors. The sector lost 85,000 jobs between October and November, according to the most recent data from the Bureau of Labor Statistics. More losses are expected in coming months as demand continues to be weak.

The purchasing managers' employment index showed its lowest reading since 1982 as manufacturers across industries continue to cut jobs.

Western Digital Corp., which makes computer hard drives, said in December it plans to cut 2,500 jobs. The drugmaker Bristol-Myers Squibb Co. said in December it would cut 800 jobs by the end of 2008.

Automotive supplier Visteon Corp. said Friday it will shift more than 2,000 workers to a four-day week and cut their pay by 20 percent as auto sales continue to founder. General Motors Corp. on Wednesday received the first tranche of $9.4 billion in low-cost loans from the U.S. Treasury, part of a package designed to keep ailing automakers in business.

http://www.breitbart.com/article.php?id=D95F4SS00&show_article=1

This is fucking Devo, happening right before our eyes...

http://steelberryclones.files.wordpress.com/2008/01/devo.jpg

And as the commodity prices fall through the floor those eking out a living in the scrap metal trade, aluminum, copper and steel, have found their income drop near 2/3s. Six months ago hauling a junker to the scrap yard was quite profitable, now it's break even.

In other news, gold jewelry sales in Abu Dahbi have fallen 40%.

And as the commodity prices fall through the floor those eking out a living in the scrap metal trade, aluminum, copper and steel, have found their income drop near 2/3s. Six months ago hauling a junker to the scrap yard was quite profitable, now it's break even.

In other news, gold jewelry sales in Abu Dahbi have fallen 40%.


Tell me about it..I knew I should've scrapped my old Chevy G20 in August..

probably a no-brainer to most here but ...

In the minutes from its last meeting, the central bank said it expects GDP to decline in 2009 and unemployment to rise into 2010. (http://cnnmoney.printthis.clickability.com/pt/cpt?action=cpt&title=Fed+sees+longer+economic+decline+than+earlier+forecasts+-+Jan.+6%2C+2009&expire=-1&urlID=33483434&fb=Y&url=http%3A%2F%2Fmoney.cnn.com%2F2009%2F01%2F06%2Fnews%2Feconomy%2Ffed_minutes%2F%3Fpostversion%3D2009010615&partnerID=2200)

NEW YORK (CNNMoney.com) -- The U.S. economy is likely to deteriorate further this year and unemployment will rise into 2010, according to the latest forecasts from the staff of the Federal Reserve.

This bleak forecast was presented to Fed policymakers when they met last month and lowered interest rates to near zero. Low interest rates are one key tool the central bank uses to try to spur economic activity.

According to the minutes from that meeting, the central bank is now predicting that gross domestic product, the broadest measure of economic activity will fall in 2009.

"I think that the Fed is really very scared right now -- like everybody else -- and they want to pull out all the stops," said David Wyss, chief economist for Standard & Poor's.

The Fed indicated that most members at its meeting expected a slow recovery to begin in the second half of the year, but that unemployment would still rise "significantly" into 2010.

Employers cut 1.9 million jobs over the first 11 months of 2008, which took the unemployment rate up to 6.7%. The December report will be released by the Labor Department Friday and economists surveyed by Briefing.com expect a loss of 475,000 jobs and that the unemployment rate will rise to 7%, which would mark a 15-year high.

The Fed cited a multitude of problems dragging down the economy besides rising unemployment, including stock market declines, low consumer confidence, weakened household balance sheets and tight credit conditions. It said business spending is also likely to fall due to weak retail sales and the credit crunch.

In addition, some members of the Fed expressed concerns that the economy could worsen even more than currently expected.

"Meeting participants generally agreed that the uncertainty surrounding the outlook was considerable and that downside risks to even this weak trajectory for economic activity were a serious concern," the Fed said in the minutes.

If the current recession, which began in December 2007, lasts throughout 2009, that would make it the longest U.S. economic downturn since the Great Depression.

Wyss said he thinks there is now little debate among policymakers about the problems in the economy and the need to take unprecedented action.

"They're already jumping, they're just asking how high," said Wyss.

The minutes also showed that some Fed members are now more worried about the threat posed by deflation, or falling prices, than they are about inflation. Deflation can slow economic activity dramatically since it could lead to businesses to cut their production plans in the wake of lower prices.

The Fed also revealed more details about other moves it plans to make to boost the economy now that it has lowered rates as far as it can.

According to the minutes, the Fed anticipates completing previously announced purchases of $600 billion in debt and mortgage backed securities from firms such as Fannie Mae and Freddie Mac by the end of June 2009. The plan to buy back these securities has already helped to lower mortgage rates in recent weeks.