European and Chinese industry activity slumped in November, Japanese officials said their economy was slowing rapidly and U.S. retailers slashed prices to lure shoppers as recession took a grip.
Bank of Japan Governor Masaaki Shirakawa warned on Monday economic conditions were deteriorating fast, and Japanese firms were finding it increasingly hard to secure credit.
"Sluggishness in economic activity has increased rapidly. Overseas economies are experiencing the same kind of rapid change," Shirakawa said in a speech.
Euro zone manufacturing activity sank to a record low in November and the outlook was equally grim.
The Markit Eurozone Purchasing Managers Index (PMI) for the manufacturing sector slumped to 35.6 in November, a low not seen in the survey's 11-year history and way below the 50 mark that separates expansions from contraction.
"The extremely weak November manufacturing purchasing managers survey intensifies fears that the euro zone's recession will be deep and prolonged," said Howard Archer, economist at IHS Global Insight.
The euro zone was officially declared in recession this month following a second quarterly contraction in economic output. Analysts do not see the economy growing again until the third quarter next year — and then only marginally.
The financial crisis that began with a U.S. housing market collapse last year and escalated into a full-blown global downturn has already knocked several big economies into recession including Germany, Italy and the euro zone. Most economists believe the United States and UK will soon follow.
Similar surveys from China showed its manufacturing industry slumped in November as new orders, especially from abroad, tumbled.
The BoJ said it would hold an emergency policy meeting on Tuesday to examine measures to help corporate finance.
Japan's economy minister was gloomier even than Shirakawa.
"We are moving to the next phase of shrinking consumption — some call it deflation — production going down and prices going down," Economy Minister Kaoru Yosano told the Financial Times in an interview published on Monday.
RATE CUTS COMING
Central banks in Britain, the euro zone, Australia and New Zealand are expected to cut borrowing costs sharply this week to resuscitate demand.
Stocks slid, with investors caught between ongoing aggressive steps by central banks to alleviate the sharp global downturn and increasingly grim economic data.
Japan's Nikkei average dropped 1.4 percent and European stocks tumbled by 2.2 percent with banks again hard hit.
Inflation in Thailand, South Korea and Australia plunged in November in synch with a global retreat, giving central banks room to slash interest rates further to soften the blow from the worst financial crisis in decades.
Expectations for more rate cuts in Britain were underlined by the UK's PMI index showing manufacturing shrank at a record pace in November after a collapse in new orders.
The headline manufacturing PMI figure plunged to 34.4 from October's downwardly revised 40.7 — both the lowest level and the biggest one-month fall in the series, which started in 1992.
Australia's central bank is expected to almost certainly slash its benchmark rate by at least 75 basis points on Tuesday on top of 200 basis points of cuts since early September, with a bigger move seen as a strong possibility. U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke both make speeches later in the day.
RAZOR-THIN MARGINS
German retail sales rose slightly in October, helping to offset the impact of slackening exports, but with unemployment expected to rise, the outlook for next year is cloudy.
Sales, including turnover at gas stations and cars, rose by 0.4 percent, Bundesbank data showed. A narrower measure excluding gas stations and auto sales had earlier shown a decline of 1.6 percent on the month.
In the United States, shoppers tried to take advantage of rock-bottom sales prices over the holiday weekend, traditionally the start of the busiest period of the year for U.S. retailers.
However, the weekend of activity does not necessarily augur well for retailers' bottom line.
"Regardless of retail sales, retail profits are another matter. Every thing they sold was at a razor-thin margin," said Ellen Davis, a spokeswoman for the National Retail Federation, which expects total holiday sales growth this year to be the weakest in six years.
