Eurozone manufacturing business shrank at a slightly slower pace in January while factory prices tumbled at their fastest rate in at least six years, a survey showed on Monday, leaving scope for further interest rate cuts. A survey on China also reported that the pace of deterioration in business conditions had eased, providing tentative evidence that factories in these two regions may be pulling out of their deep dive.
Still, South Korea reported a record fall in exports and a slump in sales pushed more Japanese electronics firms into the red highlighted the urgency for more action to contain the global downturn. In the United States, President Barack Obama will try later on Monday to overcome opposition from Republican lawmakers to parts of his plan to revive the rapidly shrinking US economy by spending nearly $900 billion.
Markets see the plan as a key part of efforts to limit the damage from the crisis sparked by a US housing slump that wiped out nearly $14 trillion in global stock market value last year, pushed several major economies into recession and put millions of jobs on the line.
In Europe, a survey of about 3,000 manufacturers showed only Germany among the eurozone's leading four economies had registered a deepening contraction in January. France, Italy, and Spain all saw some slowing in the pace of decline. The Markit Eurozone Manufacturing purchasing managers' index (PMI) for January rose to 34.4 from 33.9 in December, the eighth month in a row the index has been below 50.0, which separates growth from contraction.
The PMI also showed companies' costs falling at their fastest pace in the near 12-year survey history, suggesting more leeway for the European Central Bank to cut rates by March as is widely expected.
A purchasing managers' index on China, produced for brokerage CLSA, rose to 42.2 in January from 41.2 in December, indicating conditions are deteriorating overall but at a slower pace. Figures from South Korea were more sobering. The home to some of Asia's top manufacturers and exporters reported a record 32.8 percent drop in exports in January from a year earlier.
"The fall was really shocking," said Jun Min-Kyoo, economist at Korea Investment & Securities. "The collapse in exports would bring about negative growth this year," he said, adding that the central bank should cut rates by at least another half a point at its February 12 meeting.
The data raised the spectre of South Korea sliding into its first recession in more than a decade and highlighted the collapse in demand for the region's best-sellers: cars, consumer electronics and ships. Japanese markets, already facing the country's longest-ever recession and a return of deflation, have been repeatedly jolted by news of losses suffered by manufacturing bellwethers such as Sony or Toyota Motor Co.
Panasonic shares fell 3.1 percent on Monday after a newspaper report, later confirmed by a source, said the world's biggest plasma TV maker would book a $3.9 billion annual net loss - its first in six years. Rival electronics maker Hitachi plunged 17 percent after it warned it would lose $7.8 billion due to sinking sales, suffering the biggest-ever full-year loss at a Japanese manufacturer.
In Australia, news of a drop in house values and a survey marking the eighth consecutive month of manufacturing contraction set the stage for another hefty 1 percentage point interest rate cut on Tuesday and a new economic stimulus plan. Government data showed on Monday house prices fell 3.3 percent in the fourth quarter from a year earlier, eroding consumers' wealth and cementing expectations that the central bank will slash rates to a record low of 3.25 percent.
Prime Minister Kevin Rudd said on Monday that the global downturn and efforts to keep the $820 billion economy growing would push the budget into deficit and cost $73 billion in lost revenue over the next four years.
GERMAN PMI SLUMPS TO NEW 12-YEAR LOW: German manufacturing contracted at its fastest pace in over 12 years in January on further slumps in demand, leading employers to cut staff at a record pace, a key survey showed on Monday.
The headline index in the Purchasing Managers' Index (PMI) for Europe's biggest economy fell to 32.0 in January from 32.7 in December, bringing it further below the 50.0 mark separating contraction from expansion. The reading, which showed the sector shrinking for the sixth month running, was the lowest since the series began in April 1996 and in line with a flash estimate released on January 23.