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New recession warnings hit leading economies
2008-12-09
PARIS (AFP) - The OECD warned Tuesday that the US faced more economic pain before any recovery late next year as data showed Japan and Britain slipping even deeper into recession than previously feared. The Organisation for Economic Cooperation and Development, an influential government-funded economics institute based in Paris, was supportive of stimulus efforts for the US economy and praised cuts in interest rates. But it said the world's biggest economy "is nonetheless likely to get weaker before its gets better," forecasting a contraction of 0.9 percent next year. In Japan, Sony, a bellwether of corporate Japan, said it would cut investment in its electronics business by 30 percent, axe 10 percent of its manufacturing sites and exit unprofitable businesses to cope with the downturn. The announcement came just hours after Tokyo said its economy shrank 0.5 percent in the three months to September -- 1.8 percent on an annualised basis -- even worse than initially estimated. "The data suggests that the economy is contracting faster than previously thought, and the depth of the recession will be more severe," said Glenn Maguire, chief Asia economist at Societe Generale in Hong Kong. In Britain meanwhile, manufacturing output sank 1.4 percent in October from September, the eighth monthly drop in a row, and was down 4.9 percent on a 12-month basis, the Office for National Statistics (ONS) said in a statement. The monthly fall was the largest decline since March 2005 and means that the country has now faced the longest consecutive contraction in manufacturing output since 1980. Global stocks were mixed after their giant rally on Monday on hopes that an economic stimulus plan promised by US president-elect Barack Obama would solve some of the world's economic woes. In Asia, Tokyo ended 0.8 percent higher but Hong Kong fell 2.05 percent, Sydney lost 0.8 percent and Shanghai fell 2.54 percent. In Europe, the London FTSE 100 added 1.16 percent, the Paris CAC 40 gained 1.60 percent and Frankfort rose 0.64 percent in late morning trading. US stock futures, an indication of how Wall Street will open later in the day, stepped higher Tuesday, following two sessions of strong gains. In focus on the economic front Tuesday will be the latest figures on October pending home sales, which are due after the US market opens. Investors are also focused on a rescue plan for US automakers. Democrats in Congress have proposed a 15-billion-dollar bailout package for the troubled industry after granting concessions to the White House, which is yet to sign off on the compromise amid tough negotiations. The proposal offers less than half of the 34 billion dollars General Motors, Chrysler and Ford said they would need to stave off a "catastrophic collapse" of the nation's automotive industry. The low-cost, government-backed loans -- which would give the government an ownership stake in the firms -- are intended to sustain the troubled car giants through March, allowing president-elect Barack Obama time to address the problem after he takes office on January 20. In another industry struggling with the economic crisis, airlines were forecast Tuesday to post losses of 2.5 billion dollars (1.9 billion euros) in 2009 due to the economic crisis. The forecast by the International Air Transport Association was sharply lower from the 4.1 billion dollars projected earlier in October due to measures taken by American carriers to deal with the economic crisis, however. "The outlook is bleak," said Giovanni Bisignani, the association's director general and chief executive. "The chronic industry crisis will continue into 2009 with 2.5 billion dollars in losses. We face the worst revenue environment in 50 years." OECD website
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