If anything the global economic picture worsened overnight, a fact not lost on the Organisation for Economic Co-operation and Development (OECD), which claimed last night that the developed world is already in recession.

It sees the US economy shrinking 0.9% next year, Japan by 0.1% and the Eurozone 0.5%. This figures roughly accord with forecasts made last week by IMF, which projected the US will shrink next year by 0.7%, Japan 0.2% and the Eurozone 0.5%.

The OECD said that household consumption was in serious trouble, with car sales crashing in every market and rich countries should not expect exports to come to their rescue as world trade was likely to contract in the months ahead, while growth was also slowing in the big emerging markets of Brazil, India and China.

Figures tonight are expected to show that the heart of Europe is now in recession after third quarter growth in Germany contracted sharply, while in the US the worst monthly retail sales figures ever are expected.

The growth numbers for the 15 Eurozone economies will be released and they will show that growth of 0.5% in Germany in the three months to September, plus slowing growth in France, Italy and Spain pulled the area lower for the second quarter in a row. The Eurozone’s growth shrank 0.2% in the June quarter.

Germany‘s contraction came after a 0.4% fall in the second quarter (revised down from an initial 0.5%). The third quarter fall was the biggest since 1996.

To underline the extent of the problem, Europe’s biggest engineering company, Siemens (a huge exporter as well), revealed a profit drop and said it would cut more than 16,000 jobs in the next two years.

In London, the Governor of The Bank of England, Mervyn King, warned the country to expect a “white collar recession” as jobs in finance and other service industries will be under threat: UK telecoms giant BT backed that warning with plans to cut 10,000 jobs as profits plunged.

Mr King said the UK economy would shrink by 2% next year, with the downturn hitting those working in the managerial, services and financial sectors. He said “the world had changed” in the wake of the global financial crisis and that “people should be concerned” about the difficult times ahead.

Now a rate cut of 0.50% is seen from the European central bank next month, which would be the third cut of that size in a row.

Figures out overnight showed that the number of people out of work in the UK has hit 1.825 million, the highest since November 1997.

An extra 140,000 people were out of work in the three months to September, pushing the unemployment rate up by 0.4% to 5.8%. The number of people looking for work is 980,000, the highest since 1992.

In Washington, more than half a million Americans filed new claims for unemployment insurance last week, the highest levels since the after the 11 September, 2001, terrorist attacks, while the number of people continuing to collect benefits rose to a 25-year high.

The US Labor Department said initial filings for state jobless benefits reached 516,000 for the week ended 8 November. That’s the highest total since the week ended September 29, 2001.

The jobless filings increased by 32,000 from the previous week’s revised figure of 484,000: a year ago, the figure stood at 338,000. Economists say the increase and the pace of reported cuts at companies suggest that the October unemployment rate of 6.5% will rise to 7% by the end of the year.

In a late announcement, the upscale US department store chain, Nordstrom revealed that the retailing slump had pumelled its full year (to the end of December) sales and profits. The company cut its earnings forecast by 25% and said same store sales growth would fall 9%-10% for the year, more than the 4%-6% drop forecast in August. Nordstrom said it had slashed prices on more than 800 products (its highest sellers) by an average 22% to try and drive more traffic.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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