U.S economic outlook set for a tuff year in 2009 as jobs are cut

Manufacturing in the U.S. probably shrank in January at the fastest pace in 28 years following a collapse in sales that caused inventories to swell, economists said before reports today. Manufacturers such as General Motors Corp. and Caterpillar Inc. are cutting output and firing workers as the biggest global economic slump in the postwar era causes unsold goods to pile up. President Barack Obama last week highlighted the deteriorating economy in pushing for Congress to enact his recovery plan to save jobs and boost spending. “The recession is deepening and the urgency of our economic crisis is growing,” Obama said as he announced a task force to boost the middle class that will be led by Vice President Joe Biden. The factory slump has spread well beyond autos as demand from abroad also weakens. The U.S., Japan and the euro region are simultaneously in a recession for the first time in the postwar era. The EUR/USD is currently trading at $1.2744 as of 9:15-am, GMT.

The euro fell against the dollar on speculation a report tomorrow will show European producer prices slid a fifth month, giving the region’s central bank more room to cut interest rates. The British pound declined concern the U.K. banking crisis will deepen after Moody’s Investors Service cut its long-term debt rating of Barclays Plc. “Inflation is slowing and the eurozone economy is deteriorating,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank by market value. “The euro is likely to be sold” The yen strengthened against the dollar before a U.S. report that economists say will show manufacturing fell to the lowest level since 1980, adding to signs the global recession is worsening. The GBP/USD is currently trading at $1.4203 as of 9:55-am, GMT.

Ford Motor’s biggest annual loss in its 105-year history may herald tougher times for struggling U.S. automakers being propped up by the federal government. Even as Ford insisted last week that it can survive without U.S. aid, it took new precautions with a deeper cut in first- quarter output, a lower estimate of 2009 domestic auto demand and a decision to tap a $10.1 billion credit line. While GM and Cerberus Capital Management LP’s Chrysler say they’ll use their federal lifeline to reshape operations and return to profits, they also risk consolidation or collapse as job losses keep thinning the ranks of potential auto buyers. The USD/JPY is currently trading at 89.01 as of 10:10-am, GMT.

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