The extent of the global economic slump will be illustrated this week by interest rates cuts around the world with central banks meeting here (on Tuesday) and Thursday with New Zealand, the UK and the European central bank all poised to chop rates in another series of dramatic cuts.

At the same time surveys of sentiment in manufacturing and the services sectors in Australia, the US, Europe and several other countries this week will also reveal speed with which the two most important sectors in these major economies are contracting.

On top of this we will get the retail sales performance from US shops last weekend, a crucial one for retailers, plus jobs figures for November on Friday night, our time. They are expected to be rotten: over 300,000 jobs will be lost according to a poll by Reuters in the US with the unemployment rate jumping to 6.8% from 6.5%.

In Australia, the Reserve Bank is expected to cut interest rates by another 0.75% taking the cash rate to 4.5% in a continuing effort to head off the sort of debt-deflation spiral that now appears to be occurring in the US and UK and to limit the severity of the economic slump now underway.

Some commentators reckon the cut could be 1%, with an isolated muttering about 1.25%.

Since the last RBA Board meeting the global economic outlook has worsened and Australian economic data has remained weak all of which means another big cut in rates.

There will be more figures this week: retail sales trends for October, and building approvals, plus figures on business indicators and the balance of payments for the September quarter. The business indicators will include the important estimates on business inventories for the quarter.

The AMP’s Dr Shane Oliver says he expects GDP growth to be marginally positive at around 0.1% (or 1.8% over the year).

But he warns there’s here is a significant risk it might be negative which of course will fuel worries that Australia has already entered recession, which unfortunately is now only a matter of time anyway.

Goldman Sachs JBWere economists wouldn’t be shocked if the September reading is negative. They believe the current December quarter will be worse.

The rate decisions in the UK and Europe will probably see cuts of 0.50% by both the European Central Bank and the Bank of England. Eurozone unemployment hit a two year high in October, according to figures on Friday. The economic performance in the zone is worsening by the way. recession is already gripping the major economies and there’s a feeling worse is to come.

Eurozone unemployment saw its biggest monthly jump in 15 years, and increasing the chances of a another big cut in European Central Bank interest rates later this week.

Unemployment in the 15-country region soared by 225,000 in October: At 7.7%, October’s eurozone unemployment rate was the highest for almost two years, Eurozone annual inflation fell from 3.2% in October to 2.1% in November. It was the biggest monthly fall in inflation since the launch of the euro in 1999. Eurozone inflation peaked at 4% in July.

The slump in the US auto market and elsewhere has hurt Japan’s export performance and industrial output. That tumbled 3.1% in October and consumer spending dropped 3.8%. It had risen 1.1% in September.

Industrial production dropped 7.1% in the year to October.

The Trade Ministry had even gloomier news in the detail of the output report.

The Trade Ministry said Japanese companies planned to cut production 6.4% in November, the worst since the survey began in 1973, and a further 2.9% this month. That’s a fall of 12% from October to the end of December, which is a sudden deepening of the slump.

South Korea saw industrial production fall 2.3% in October, mirroring the experience of Japan.

Sweden fell into recession in the third quarter after its economy contracted 0.1% after a similar contraction in the June quarter. It joins Ireland, Italy and Germany as European Union members now in recession. New Zealand, Japan, Denmark are other economies also in recession.

Peter Fray

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