World economy falling deeper into recession

THE world economy has taken a sharp turn for the worse, with early estimates showing global output fell more than 4 per cent in the last three months of last year, with further decline expected over the next six months.

The OECD warned yesterday of a “deep slowdown” in all major industrial economies and most of the emerging economies, including China.

The last official forecasts from the International Monetary Fund had predicted China would continue to record strong growth, while the world economy was tipped to grow 2.2 per cent this year.

However, estimates are being revised sharply lower in the wake of huge falls in industrial production in all major world economies.

Although the global downturn will hit Australia’s prospects, the credit rating agency Standard & Poor’s yesterday said its AAA credit rating was not in jeopardy.

New Zealand, Spain, Greece and Ireland have all been warned over recent days that their credit ratings are at risk.

The Australian mining industry yesterday announced plans to cut 570 jobs across three states with Rio Tinto shelving nearly $900 million of planned expansions.

Swiss-based mining giant Xstrata said it would cut another 89 contractors and 60 employees at its Mt Isa zinc operation in response to the world financial crisis.

Further job losses will come from Rio’s decision to cancel a copper mine expansion in NSW and the closure by OZ Minerals of zinc mines in Queensland and Western Australia.

Official figures will be released over the next six weeks, but JPMorgan estimates the global downturn at 4.6 per cent.

JPMorgan downgraded its forecast and expected Australia to suffer a recession with negative growth in both the December and March quarters.

Monthly surveys of manufacturing production conducted in all major economies indicate that world industrial production slumped 19 per cent in the December quarter.

World steel output tumbled 17per cent between September and November.

“Chinese production was falling sharply, and although it stabilised a bit in November, there were massive falls in the United States and in other steel-producing countries.

Japan’s industrial production fell by 8 per cent in November, its biggest fall in 55 years. There were smaller falls in industrial production in Germany, France, Britain and Spain.

The OECD warned yesterday that the seven biggest industrial economies and the major emerging economies were all facing a deep slowdown, based on its “leading index”.

article excerpts news.com