A day after the US Federal Reserve suggested that the US economy had worsened since mid-December, when it last met, more figures and company reports appeared to confirm that trend.

The Fed said in its post meeting statement: “Information received since the Committee met in December suggests that the economy has weakened further. Industrial production, housing starts, and employment have continued to decline steeply, as consumers and businesses have cut back spending. Furthermore, global demand appears to be slowing significantly.”

Overnight we learned that the number of Americans receiving unemployment benefits soared to a record, more companies cut jobs, fewer new homes were sold and a key component of manufacturing — durable goods orders — fell for a fifth successive month.

According to the US Labor Department first-time job filings increased 3,000 to 588,000 in the week ended January 24, while over the four weeks to the preceding Saturday, January 17 claims for benefits rose to 4.776 million, the highest since record-keeping started in 1967.

Another government report showed durable goods fell 2.6% in December, the fifth fall in a row and larger than forecast by the market. It followed a nasty 3.7% fall in November.

And new home sales fell to an annual rate of 331,000, a rate that would take more than a year to clear the glut of unsold properties. According to the National Association of Realtors there’s almost 13 months supply of unsold homes on the market in America and its being boosted daily by more and more foreclosures. For 2008 as a whole, sales fell by 37.8% to 482,000 homes, the weakest results since 1982, when 412,000 homes were sold and against 776,000 in 2007.

The annual pace of new home sales is still well above the 550,000 new home starts in December, so the gap is proving tough to close.

Ford Motor Co posted a deeper-than-expected $US5.9 billion quarterly loss for the December quarter but said it would have the cash to survive the worst downturn in auto sales in decades without the government support that General Motors and Chrysler have been given. Ford said it was cutting some 2,500 white-collar jobs in its financial arm, Ford Credit and will access its remaining $US10.1 billion credit line after burning through $5.5 billion of cash in the quarter as its car sales plunged 34% around the world. Ford lost $US14.7 billion over the year, the third annual loss in a row.

Blue-chips 3M and Textron revealed lower sales and profits for the last quarter of 2008, cut 2009 forecasts and worryingly, both also said they were hacking into capital spending over the year to conserve cash.

They are not the only companies doing that and collectively the cutbacks in capex will total in the tens of billions of dollars and will further weaken demand as the year goes on, and put further pressure on jobs at the companies themselves and their suppliers and associates.

US manufacturers across the sector are bracing for a brutal year. Some 33 percent look for revenue to decline this year, with just 25 percent expecting growth, according to the PricewaterhouseCoopers Manufacturing Barometer survey released overnight. It is the first time in the survey’s more than five-year history that more executives expected contraction than anticipated growth.

In Europe, there was a sharp rise Germany’s unemployment rate while in Japan, widespread job cuts added to the pressures.

Official figures showed the jobless rate in Germany jumped 387,000 over the last month to almost 3.5 million, well above forecasts for Europe’s largest economy, which is due to hold national elections later this year. The Government confirmed its 50 billion euro stimulus package this week and has already allocated 500 billion euros to help stabilise the country’s banks. At least five have failed or been bailed out since August 2007.

And the international airline industry has an “unprecedented and shocking” plunge in global air cargo traffic

Air freight accounts for 35% of the value of goods traded internationally and the International Air Transport Association (IATA) said traffic volumes had fallen by 22.6% year-on-year in December.

Remember that the IMF reported the day before that international trade fell at an annualised 45% in December, such as the extent of the slowdown and the credit crunch hitting trade finance and demand.

IATA’s director general, Giovanni Bisignani, said, “there is no clearer description of the slowdown in world trade. Even in September 2001 (after the 9/11 terrorist attacks in the US), when much of the global fleet was grounded, the decline was only 13.9 per cent.”

International passenger traffic fell in December by 4.6%. IATA said that fall was less dramatic than in cargo, as volumes had been supported by year-end leisure travel that had been booked in advance.

In Japan there was also grim news on the jobs front with Nippon Sheet Glass Company saying it will shed 5,800 jobs by 2010 and Toshiba announcing plans to cut 4,500 jobs this year after losing money.

Sony Corporation warned it remained on course for its biggest ever loss in the year to March following a fall in demand for televisions, cameras and games consoles. It is cutting 16,000 jobs worldwide, so the pressures remain for more chopping. Even Nintendo, which has had good sales and earnings in recent years thanks to surging sales of the Wii and other game consoles, chopped its 2008 profit estimate by a third overnight.

In Europe, the giant Royal Dutch Shell said it made a net loss of $US2.81 billion in the final quarter of 2008 as plunging prices slashed the value of inventories.

Eastman Kodak is cutting 3,500 to 4,500 jobs, or up to 18% of its work force, after revealing a fourth-quarter loss of $US137 million on falling sales of both digital and film-based photography products. The shares fell to a 35 year low.

In a rare bit of good news, Amazon, the world’s biggest internet retailer, had a 8.7% rise in 4th quarter profit after promotions and discounts lured consumers to its Web site. Sales rose 18% to $US6.7 billion.

And lot’s of people want clean teeth, so that’s why Colgate did well. The company reported better-than-expected quarterly profits, thanks to growth emerging markets and price increases.

But it suggested 2009 profits might not be so hot. Sales rose 0.5% to $US3.66 billion. Volume rose 1%. In Latin America, the company’s largest unit, sales rose 5.5% and volume rose 5%. Colgate said its namesake toothpaste added market share in countries including the US, Mexico, Brazil and China during the quarter.

The company is bringing out new toothpastes, Speed Stick deodorants and other products to attract US shoppers. It also makes Irish Spring soap and Hill’s pet food. Quarterly profit hit $US497 million, up from $US414.9 million and came despite the impact of higher commodity prices and the higher dollar. Commodity prices will be lower this year, but the dollar higher, which will hurt.

Peter Fray

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