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Friday, 30 January 2009

Global economic woes deepen

BERLIN - A SURGE in German unemployment and Asian job cuts signalled deeper distress in the world economy on Thursday but an index of European confidence beat expectations and traders took heart from a US economic rescue package.

Official figures showed the jobless total in Germany jumped 387,000 in January over the previous month to almost 3.5 million, well above forecasts for Europe's largest economy.

The unemployment rate surged to 8.3 per cent of the workforce from 7.4 per cent in December.

There was also dismal news on the labour front in Asia's largest economy with Japan's Nippon Sheet Glass Company saying it will shed 5,800 jobs by 2010 and Toshiba announcing plans to cut 4,500 jobs this year after going into the red.

Toshiba chief executive Atsushi Nishida told reporters that the company aimed to cut 300 billion yen (S$5 billion) in costs in the next financial year to weather the global crisis.

Other titans of Japanese industry were also showing the strain with Sony Corporation warning it remained on course for its biggest ever loss in the year to March following a fall in demand for televisions, cameras and games consoles.

Even Nintendo, which has enjoyed spectacular growth in earnings in recent years thanks to surging sales of the Wii and other game consoles, cut its annual net profit forecast by one-third to 230 billion yen.

The news in Europe, despite the German jobless rate, was not uniformly grim.

The European Commission's economic sentiment indicator dropped to 68.9 points in January from 70.4 in December, hitting the lowest level since the survey began in January 1985.

But the slide, less sharp than declines seen in recent months, was also not as deep as economists had expected, with their forecasts - as polled by Dow Jones Newswires - anticipating a decline to 64.9 points.

Recent business and consumer surveys in Germany and France have also shown marginal improvements, fuelling hopes that the recession may have hit bottom.

More than a million French workers nevertheless walked off the job on Thursday on a national day of strikes and protests against President Nicolas Sarkozy's handling of the economic crisis.

Many in France fear they will lose their jobs in a crisis they blame on bankers and the failures of the market and are demanding protection from layoffs, a boost to low wages and an end to public sector cutbacks.

Investors and analysts were meanwhile pinning hopes on President Barack Obama's US$819 billion plan to spark some life into the recession-strapped US economy.

The US House of Representatives approved the measure on Wednesday, without support from the opposition Republican Party, and the Senate will now vote on its own version of the bill before a final draft reconciling the two goes to Mr Obama for signature.

'I hope that we can continue to strengthen this plan before it gets to my desk,' the president, who has pushed the Congress to pass a final measure by mid-February, said in a statement.

The stimulus plan includes about $275 billion in tax cuts, including a credit worth $500 for each worker and $1,000 for couples. Most of the package's value however is in infrastructure spending.

'The progress through the House of Representatives of the package with a comfortable margin will be cheering US sentiment but certainly no one will be under the illusion that this is the turning point for the economy,' said analyst James Hughes at CMC Markets in London.

Asian markets were lifted on Thursday by news of the plan's progress.

But Europe's main stock markets fall sharply in early trade, dragged down by the banking sector, which ended a brief rally on profit-taking.

In late morning deals, London fell 1.67 per cent. Frankfurt dropped 0.95 per cent and Paris lost 1.0 per cent nearing the half-way mark. -- AFP

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