■ Free fall. The global economy is in its deepest recession of the post-war era. Industry, first and foremost the automotive sector, is being hit especially hard. Industrial production almost collapsed towards the end of 2008. Double-digit declines were the order of the day (cf. chart).
■ Industrialized world. In the US, output in the manufacturing sector plummeted at an annual rate of 16% in Q4; the production of consumer durables even plunged 26%! EMU-wide, industrial output was down 13%, while for Germany, the global export champion, the number was almost 17%. And no improvement is in sight (pages 2-7).
■ Emerging markets. But the countries hardest hit at the turn of the year were the Asian Tigers, first and foremost Taiwan and Korea. Production contracted by more than one third at an annualized rate. China fared better relatively speaking, but there too growth rates plummeted.
■ Protectionism? Plant closures, short-time work and drastic layoffs are the upshot, thereby fueling the danger of growing protectionist sentiment. Obama intends to make trade policy serve the creation of US jobs, since more than 50% of US citizens see foreign trade as a threat to the US. China's FX policy was already criticized by the new US Administration.
■ Further topics:
- Euro: Don't get fooled, it's a one-way door (page 8).
- US financial reform linked to bank bail-out strategies (page 10).
- Data outlook: Ifo business climate has not yet found a floor; US Q4 GDP expected to shrink by 6% annualized (page 13).
- Market outlook: EUR to stay under pressure; government bonds in correction mood (page 23).
