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That manufacturing is in decline is hardly surprising, but the depth and speed of the plunge are striking and, most worrisome for economists, a self-reinforcing trend not unlike the cascading bust that led to the Great Depression.
In Europe, for example, where manufacturing accounts for nearly a fifth of gross domestic product, industrial production is down 12 percent from a year ago. In Brazil, it has fallen 15 percent; in Taiwan, a staggering 43 percent.
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“Manufacturing has fallen off the cliff, and it’s certainly the biggest decline since the Second World War,” said Dirk Schumacher, senior European economist with Goldman Sachs in Frankfurt.
The pattern of manufacturing and trade ominously recalls how the financial crisis of 1929 grew into the Great Depression: tightening credit and consumer fear reduced demand for manufactured goods in one country after another, creating a downward spiral that reduced global trade.
“Plunging manufacturing suggests that as bad as things were in the fourth quarter, they are at least as bad now,” said Robert J. Barbera, chief economist at ITG, a New York research and trading business. “This is a classic adverse feedback loop. It won’t quickly correct itself.”
That means more workers can expect to lose their jobs around the world in coming months as manufacturers continue to cut production, especially as global trade contracts.
In fact, trade is shrinking even faster than production. Germany’s exports down are 20 percent from a year ago, Japan’s have plunged 46 percent, and in the United States, exports fell at an annualized rate of 23.6 percent in the fourth quarter of 2008. ......
While manufacturing equals about 14 percent of gross domestic product in the United States, it totals 18 percent worldwide, and accounts for 33 percent of G.D.P. in China, according to the World Bank. ...
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