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A Look Over The Manufacturing Sector

Written by A Forex View From Afar on Tuesday, November 04, 2008

Manufacturing on both sides of the Atlantic took a beating in the last few months, as the limited access to credit and liquidity dampened consumption.

The Manufacturing ISM report showed that the U.S. manufacturing industry is contracting at the highest speed seen in the last 26 years. The read of 38.9 corresponds to a noticeable decline in the GDP numbers. The release also showed that exports, which until now were the only thing that helped keep GDP positive, fell to the lowest level since 1988. It seems the U.S. trade balance will have to wait another few years until someone starts to actually think about it. U.S. exports are set to decline as demand weakens at a strong pace in the biggest trading partners.

In the Euro-area, the Manufacturing PMI fell for the fifth consecutive month in October, to the lowest value on record, with many of the sub-indexes at record low values. The recent economic releases suggest the Euro-area may already be in a recession, after the second quarter GDP came in at -0.2%. In the U.K., manufacturing output also dropped at a record pace the release showed today. The main reason cited was that internal and foreign demand has been dampened.

All this put together shows the world’s major economies will face a very harsh period ahead. As the manufacturing sector becomes gloomier, the number of job cuts will increase. This will only make things hard in the short-term, adding more hurt to a global economy that seems to be in great pains.

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