Consumer Confidence Up Slightly
Although consumers continue to worry about job losses, consumer sentiment rose in January to 61.2 from 60.1 in late December, says the Reuters/University of Michigan Surveys of Consumers. Lower prices provided some relief for people worrying about finances and income.

The majority of consumers reported that their financial situation had worsened in January, according to the survey. "Consumers have become defensive minded, protecting their future living standards through increased saving, even if it meant giving up some items, changing brand preferences or spending habits," explains Richard Curtin, the director of the Reuters/University of Michigan Surveys of Consumers.

The Index of Consumer Expectations, a closely watched component of the Index of Leading Economic Indicators, was 57.8 in January, just ahead of the 54.0 in December.

Worse Decline for U.S. Economy
The U.S. economy contracted at an annual rate of 3.8 percent in the last quarter of 2008, according to a Commerce Department report release Friday. The third-to-fourth-quarter pace was the largest decline in more than 26 years, but economists had forecast much worse. It is the first time the U.S. has seen consecutive quarterly declines since 1991, BBC News adds.

In response, President Barack Obama announced the formation of a task force, to be headed by Vice President Joe Biden, which would focus on creating well-paid jobs for middle-class working families. He also said he wanted to "level the playing field" for labor unions, BBC News reports.

"I do not view the labor movement as part of the problem. To me, it's part of the solution," he added.

As spending on durable goods plunged 22.4 percent during the quarter, businesses cut jobs to cut costs. The unemployment rate jumped to 7.2 percent in December and overall consumer spending was down 3.5 percent, the Associated Press notes. Overall exports fell by 19.7 percent.

Some believe the current January-March period will probably turn out to be the worst quarter of the recession with contraction around 5 percent, the AP says. The only good news is that once-surging prices are now dropping at a rate of 5.5 percent in Q4 2008.

Durable Goods Orders Down Fifth Consecutive Month
New orders for manufactured durable goods in December decreased $4.7 billion, or 2.6 percent, to $176.8 billion, the U.S. Census Bureau announced on Thursday. This is the fifth consecutive monthly decrease.

"In addition, the global nature of the severe recession knocked out an important pillar of strength for equipment industries — exports," Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, tells IndustryWeek. "An improvement in the gloomy conditions for capital goods, unfortunately, will not occur until late this year. Businesses first need to see positive signs that credit is available and consumers are willing to spend again."

Excluding a 0.6 percent increase in transportation goods, orders fell 3.6 percent, and minus a pickup of defense orders, durable-goods orders fell 4.9 percent. The December decline exceeded the expected 2.0 percent fall forecast by economists surveyed by MarketWatch.

According to the report, civilian aircraft was expected to do well after the strike at Boeing Co. ended, yet orders in the sector fell 43.6 percent instead. In the fourth quarter of 2008, durable-goods orders declined by an average of 4.9 percent per month, and for the year, durable-goods orders were down 5.7 percent. This is the largest annual decline since 2001, MarketWatch reports.

Shipments fell 0.7 percent in December and were down 1.4 percent, excluding transportation goods. As expected, inventories rose 0.4 percent.

Global Output Set to Fall; UK to be Hardest Hit
World economic growth is set to fall to just 0.5 percent this year, its lowest rate since World War II, says the International Monetary Fund (IMF). The organization revised its October forecast when it predicted world output would increase by 2.2 percent in 2009.

"We now expect the global economy to come to a virtual halt," said IMF chief economist Olivier Blanchard in a statement.

The IMF predicts growth in emerging and developing economies to slow sharply from 6.25 percent in 2008 to 3.25 percent in 2009. It predicts the U.S. economy will shrink by 1.6 percent and the eurozone economy will decrease by 2 percent.

The IMF also projects the United Kingdom to be the hardest hit among developed nations, expecting its economy to shrink by 2.8 percent this year. This is worse than the 2 percent average drop in output the IMF estimated for advanced nations. The UK economy slumped by 1.5 percent in the final three months of the year, and over 2008 as a whole, the British economy shrank by 0.7 percent.

The IMF says the global economy is projected to experience a gradual recovery in 2010, with growth picking up to 3 percent.

States Cut Welfare Rolls Amid Unemployment Crisis
Even during one of the worst unemployment crises, 18 states cut their welfare rolls last year and the number of people in the U.S. receiving cash assistance remained at or near the lowest in more than 40 years.

Michigan and Rhode Island topped an unemployment rate of 9 percent in October, and cut its welfare rolls 13 percent and 17 percent, respectively, the New York Times reports.

Of the 12 states where joblessness grew most rapidly, eight reduced or kept constant the number of people receiving Temporary Assistance for Needy Families, the main cash welfare program for families with children. Nationally, for the 12 months ending October 2008, the rolls inched up a fraction of 1 percent.

Ford Not Seeking Government Aid
Despite a quarterly loss of $5.9 billion in Q4 2008 and a full-year loss of $14.6 billion, the worst annual performance in its 105-year history, Ford Motor Company insists it does not need a government bailout, the (UK) Times reports. The second-largest automaker in the U.S. burned through $5.5 billion in cash the last three months of 2008, cutting its reserves to $13.4 billion.

"Based on current planning assumptions, it does not need a bridge loan from the U.S. government, barring a significantly deeper economic downturn or a significant industry event, such as the bankruptcy of a major competitor that causes disruption to the company's supply base, dealers or creditors," Ford said. The company finished 2008 with $24 billion in available liquidity for its auto operations, including $13.4 billion in cash.

Although the company did not reveal how much money it needed to operate, it said it had enough cash to fund its planned restructuring due to the $23 billion in commercial loans it secured in 2006. It would draw on its existing credit line this quarter, making $10.1 billion in cash available to fund its operations. Ford also reports of having reached an agreement with the United Autoworkers union to end the "jobs bank" that enables workers to get paid even when there is no work for them.

Ford is also planning to cut 1,200 jobs at its Ford Motor Credit unit in response to weak conditions and asking the U.S. Treasury about ways to boost Ford Motor Credit that would enable its customers to get loans to buy new cars.

Automakers Welcome Potentially Tighter Regulations
In a turn unexpected by many, U.S. automakers have embraced a move by President Barack Obama to potentially tighten emission standards, hoping it would free up research funds and simplify U.S. regulations, IndustryWeek reports. "Obama ordered the Environmental Protection Agency to reconsider its rejection of an attempt by California to impose new emissions regulations which are significantly more restrictive than federal standards."

Initially, automakers fought the rejected rules, but last week greeted Obama's announcement without complaint, adding they were ready to work with the new administration. "We look forward to contributing to a comprehensive policy discussion that takes into account the development pace of new technologies, alternative fuels and market and economic factors," GM reportedly said.

The Transportation Department was also asked by the new U.S. president to produce the guidelines to enforce a 2007 law that requires U.S. cars to reach average fuel efficiency of 35 miles per gallon by 2020.

More on this to come in tomorrow's IMT e-newsletter...