First, the US numbers…
In the United States on Friday, a crucial measure of manufacturing activity fell to the lowest level in 28 years in December. The Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index was 32.4 in December down from 36.2 in November.
â€œManufacturing activity continued to decline at a rapid rate during the month of December,â€ said Norbert J. Ore, chairman of the Institute for Supply Management Manufacturing Business Survey Committee. This index was at the lowest reading since June 1980 when it was 30.3 percent.
Then, the rest of the world…
Australiaâ€™s manufacturing index showed a seventh month of contraction, and a similar survey in India showed activity down for a second month in December. In South Korea, December data showed exports plummeted 17.4 percent from a year earlier.
President Lee Myung-bak of South Korea pledged on Friday that the government would go into â€œemergencyâ€ mode to pull the country out of its economic crisis.
And in Singapore, the economy shrank 12.5 percent in the last quarter of 2008 from the previous period, prompting the trade and industry ministry to lower its growth forecast for 2009. The ministry now expects Singaporeâ€™s economy to shrink up to 2 percent, with only 1 percent growth at best. Previously, it had expected up to 2 percent growth.
And with consumer demand rapidly shrinking due to economic worries, these numbers will only get worse before they get better.
Well, the busiest time for manufacturers is the one leading up to the holiday season. If those numbers went down during that period, there’s little doubt they’ll continue to drop because people will be tightening their belts even further after their x-mas spending.
What’s more, my guess is that people are going to start saving a lot more of their paychecks because they’re worried about their jobs. This isn’t necessarily a bad thing for each individual, but the net effect is it drives demand down even further, which will drive manufacturing down, and that means we’ll continue to see prices deflate.
At least that’s my best guess based on the data I’ve seen the past few months.
What’s your take on it?