Rapid Declines in Manufacturing Output Spur Global Anxiety:

[amborin]

"....That manufacturing is in decline is hardly surprising, but the depth and speed of the plunge are striking and, most worrisome for economists, a self-reinforcing trend not unlike the cascading bust that led to the Great Depression.

In Europe, for example, where manufacturing accounts for nearly a fifth of gross domestic product, industrial production is down 12 percent from a year ago. In Brazil, it has fallen 15 percent; in Taiwan, a staggering 43 percent.

Even in China, which has become the workshop of the world, production growth has slowed, with exports falling more than 25 percent and millions of factory workers being laid off....

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The pattern of manufacturing and trade ominously recalls how the financial crisis of 1929 grew into the Great Depression: tightening credit and consumer fear reduced demand for manufactured goods in one country after another, creating a downward spiral that reduced global trade.

“Plunging manufacturing suggests that as bad as things were in the fourth quarter, they are at least as bad now,” said Robert J. Barbera, chief economist at ITG, a New York research and trading business. “This is a classic adverse feedback loop. It won’t quickly correct itself.”

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....In fact, trade is shrinking even faster than production. Germany’s exports down are 20 percent from a year ago, Japan’s have plunged 46 percent, and in the United States, exports fell at an annualized rate of 23.6 percent in the fourth quarter of 2008.

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....The sudden reversal in global manufacturing suggests that Americans should not expect economic relief from abroad soon, despite a slightly more optimistic mood on Wall Street lately and President Obama’s call for more stimulus spending by foreign governments.

While manufacturing equals about 14 percent of gross domestic product in the United States, it totals 18 percent worldwide, and accounts for 33 percent of G.D.P. in China, according to the World Bank......That means that China, Brazil, India and other fast-growing emerging market countries that have escaped the worst of the fallout from the credit crisis will increasingly suffer, dragging down demand in more advanced Western economies even as government-led stimulus packages kick in....."

<http://www.nytimes.com/2009/03/20/business/worldbusiness/20shrink.html?_r=1&ref=business>

[amborin]

1. Krugman's take on this: with chart:

<http://krugman.blogs.nytimes.com/2009/03/20/the-great-recession-versus-the-great-depression/>