China, India and Russia factories slash jobs and output

Factories in China, India and Russia slashed output and jobs at a record pace in December in another sign the world’s largest emerging markets were wilting under the recession that has gripped most industrialised nations.

Factory activity surveys in the United States and Europe yesterday are expected to show steeper contractions in December, as demand collapses at home and crushes growth in many of the developing nations that rely on Western consumption.

Economists and policymakers had seen China, Russia, India and Brazil, with their vast markets and rising wealth, as the engines of growth that could save the world from recession. Those hopes are fading fast and forecasts are getting gloomier.

For Chinese factories and policymakers looking to contain an economic slump, there was much cause for pessimism.

Manufacturing activity fell for a fifth month as the global financial crisis bludgeoned demand for exports, the Purchasing Managers’ Index (PMI) showed yesterday.

“With five back-to-back PMIs signalling contraction, the manufacturing sector, which accounts for 43% of the Chinese economy, is close to technical recession,” Eric Fishwick, head of economic research at CLSA.

PMIs in Russia and India offered similarly grim readings with the headline, employment and output indices sinking to record lows. — Reuters

The contraction in Russian manufacturing is deeper than the the slump during the 1998 financial crisis, which saw bank collapses and a default on sovereign debt. In India, factories cut jobs for the first time in the survey’s 3½-year history to reduce costs.

In all three countries, factories reported slumping export orders with recession chilling demand in the their largest markets — the United States, Japan and Europe. — Reuters