Commodities Surge
On Friday, crude oil prices fell more than 5.4 percent in "the biggest one-day slide since 2004 as dealers turned their focus to rising supply levels and weakening global demand," Reuters reports. The price of oil ended the week with a 0.6 percent gain after rising about 6 percent between Monday and Thursday. Other commodities, including wheat, soybeans and corn, all rose last week, as did gold.

Oil prices rallied nearly 5 percent on Thursday alone, as global supply concerns flared due to rising tensions between Russia and Western countries, particularly the United States, since Russia's military intervention in Georgia earlier this month.

Russia, Georgia and Western Markets
"In some ways, the markets are accomplishing for the West what diplomacy can't," according to MarketWatch. "[Last week] data showed that since it invaded Georgia, Russia has experienced the deepest drop in foreign-currency reserves in its history.

"The Russian stock market has fallen since the tanks rolled, too," MarketWatch continues. "Eventually, it may be financial pressures of this kind, rather than frosty rhetoric and aggressive diplomacy, that make [Russian Prime Minister Vladimir] Putin sit up and take notice."

Oil Giants Producing Less
"Oil production has begun falling at all of the major Western oil companies, and they are finding it harder than ever to find new prospects even though they are awash in profits and eager to expand," the New York Times reports. "Western oil companies are being squeezed out of resource-rich provinces. They are being forced to renegotiate contracts on less-favorable terms and are fighting losing battles with assertive state-owned oil companies."

Moreover, "much of their production is in mature regions that are declining." According to experts, "the oil giants that once dominated the global market have lost much of their influence — and with it, their ability to increase supplies."

Today's 10 largest holders of petroleum reserves are state-owned companies, like Russia's Gazprom and Iran's national oil company.

Forecast of Future Economic Activity Falls
The Conference Board announced on Thursday that its monthly forecast of future economic activity fell 0.7 percent in July. The Associated Press calls it "the largest drop in a year," as "new jobless benefit claims fell for the second straight week," though they still "remain near the highest levels since 2002."

"Most economists had predicted a drop of 0.3 percent in the index," according to Agence France-Presse (AFP).

AP says the reports are "the latest evidence that the languishing U.S. economy remains stuck in low gear."

China Passes U.S. as Top Japanese Market
"Mainland China overtook the U.S. as Japan's largest export destination for the first time last month, underlining the growing importance of Chinese demand to the world's second-largest economy," the Financial Times (FT) reported on Thursday. "Exports to China, which have risen in each of the last 38 months, expanded by 16.8 percent in July to their highest level since the Japanese government began compiling statistics in 1950."

Meanwhile, exports to the U.S. declined by 11.5 percent, marking the 11th consecutive monthly drop.

Rough Road Ahead for U.S. Economy
"The weakness in the U.S. economy shows no signs of immediate abatement, and significant challenges may last well into 2009," according to the Manufacturers Alliance/MAPI on Thursday. The group forecasts gross domestic product (GDP) growth slowing down to 1.6 percent in 2008 and decelerating to 1.3 percent in 2009.

Manufacturing production growth, which is expected to decline 0.5 percent in 2008 following an already-low 1.7 percent growth in 2007, is forecast to return to ("albeit weak") positive range in 2009.

"The Internal Revenue Service accelerated the payment of tax rebates this year under the economic stimulus plan, getting cash in consumers' hands earlier than expected," Manufacturers Alliance/MAPI chief economist Daniel J. Meckstroth said in a statement. "The cash windfall is only temporary, and we expect a corresponding decline in spending in fourth quarter 2008 and into early 2009."

British Economy Stalls
"Britain's economy saw zero growth in the second quarter compared with the first three months of 2008," AFP reports of data from the Office for National Statistics on Friday. This leaves "the country on the brink of recession," according to analysts." The new reading of 0.0 percent growth was the weakest quarterly rate since the second quarter of 1992.

Meanwhile, the FT (registration required) last week reported that the CBI's monthly survey of the British manufacturing sector provided more evidence that British "businesses are struggling." The CBI's survey recorded "the weakest expectations for output growth since late 2001, with 36 percent of those surveyed reporting that their total order book was below normal in July."

However, "in a sign that manufacturing might be receiving some benefit from a weaker pound, only 31 percent of those surveyed said their export order book was below normal, while a further 41 percent said export orders were at normal levels," FT reports. Moreover, the survey found that "87 percent of manufacturers said stock on hand was adequate or more than adequate to meet customer demand, suggesting there will be little kick to the economy from rising production," though there "was little good news on the inflation front, with no sign that the recent drop in oil prices had filtered through."

Eurozone Output Drops
Manufacturing activity in the 15 countries sharing the euro fell for the third straight month in August, with output down in both the manufacturing and services sectors, according to the Eurozone's purchasing managers' index (PMI) last Thursday.

Compiled by data and research group Markit, the PMI rose slightly to 48.0 in August from 47.8 points in July, according to the initial, unrevised estimate. A level below 50 for the index indicates a contraction of activity in the sector.

The new data suggests that GDP "probably stagnated in the third quarter, raising hopes that the region has not yet entered a technical recession of two consecutive quarterly declines," Jacques Cailloux, head of Eurozone economics for RBS, which sponsors the survey, told AFP (via EUbusiness.com).

South African Manufacturing Falls
"An index measuring South African manufacturing output fell to its lowest level since its inception in September 1999 as rising interest rates slowed consumer spending and fuel prices surged," Bloomberg News reports.

The seasonally adjusted Investec Purchasing Managers Index fell to 42.8 last month from 43.8 in June. A reading below 50 indicates a contraction in output. Manufacturing, which makes up 16 percent of the economy, fell after six increases in interest rates within a year cut spending on goods such as automobiles and furniture. "Record high oil prices have also boosted production and transport costs for manufacturers, further crimping output," Bloomberg reports.

Chrysler Plans Summer 2009 Shutdown
Chrysler LLC told employees last week that it will still require all workers to take the same two-week summer vacation.

Ford Motor Co. and General Motors Corp. have a summer shutdown at their factories, and often white-collar workers take time off during the period.

"While summer production shutdowns are the norm in Detroit, Chrysler in July required most white-collar workers to take a two-week vacation, too," the Detroit Free Press reports. "Workers were told of the news last March and some complained about the lack of notice."

Giving salaried workers much more notice than before, the automaker told employees by e-mail on Wednesday that the 2009 summer break will take place the weeks of July 13 and 20.

This year, Chrysler "saved a small amount of money in reduced energy use due to the shutdown," but the company "has said this year's required vacation time was not a cost-saving measure, but an attempt to become more efficient," AP reports. Still, "industry analysts said cost savings were probably a factor."