From Macro Man…

And let’s make no bones about it- the US (and almost certainly the world) economies are sliding into recession, if they ain’t there already. Yesterday’s monthly drop in industrial production (2.4%) was the lowest since Mrs. Macro was born (i.e. 1974.) Ex-post, of course, the figure was spun off as being negatively impacted by the hurricanes and Boeing strike last month.

This, of course, begs two questions:

1) Haven’t there been other hurricanes and strikes in the last 34 years?
2) It’s not exactly new news that there were hurricanes and strikes last month, so why weren’t they in the economists’ forecasts (which expected a 0.8% monthly drop)?

From Felix Salmon…..

Has there been a more demoralizing and disappointing major stock market, over the course of the past 20 years, than Japan’s? It reached its nominal all-time high of 38,957 in December 1989; it closed today at 8,693, just 800 points or so north of its 2003 low.

From Bloomberg….

Industrial production in the U.S. fell in September by the most in almost 34 years as hurricanes and an aircraft strike combined with the credit crunch to weaken manufacturing.

The 2.8 percent decrease in production at factories, mines and utilities exceeded forecasts and followed a revised 1 percent decrease in August, the Federal Reserve said today. For the third quarter, output fell at an annual rate of 6 percent, the biggest decline since 1991.

From Fortune……

Why was it so desperate for cash? The company offers only the blandest reasons for its move, but investors were clearly worried that commercial paper was an important factor. Commercial paper is how corporations borrow for short periods, typically just a few days, for immediate purposes; it’s attractive because companies borrow only what they need, and interest rates are low. Lots of firms use commercial paper, frequently just for paying day-to-day bills, but no company uses it anything like GE. GE Capital alone has about $74 billion of commercial paper outstanding; the next largest player, J.P. Morgan, has about $47 billion. GE understood there was risk in relying so heavily on this source of funding but believed it was well prepared for any disruption through access to other sources, such as bank lines of credit.

On the morning of Oct. 1, the markets swirled with rumors that GE couldn’t roll over its commercial paper coming due. Like so much else that has happened in recent weeks, this possibility would have seemed outlandish just a month before; a spokesman insists the company has experienced no such problems. But in light of GE’s huge commercial paper obligations and the disruption of global credit markets, the rumors became just barely plausible. That’s when the stock suddenly dropped 10%, and the price of GE credit default swaps jumped. Regardless of how realistic the market’s fears were, the episode puts the Fed’s decision five days later to backstop the commercial paper market in a new light, as a signal of support for the commercial paper market’s biggest player.

From CNN Money…..

The price of oil fell Thursday, shedding more than half its value since the summer’s highs, after a government supply report signaled weak demand for petroleum products.

Light, sweet crude for November delivery fell $4.69 to $69.85 a barrel on the New York Mercantile Exchange. Oil is now down 52% from July’s all-time high above $147 a barrel.

Thursday’s closing price was the lowest since Aug. 23, 2007 when oil settled at $69.83 a barrel.

Granted it has been a little more then a year. Still oil prices more than doubled from the price they were at back in August of last year and then went back again to the old price in little more than a year. Makes you wonder what next year will bring.

The amount of money that has been promised to back stop the financial system is unreal. The logic behind these sums is that the fear engulfing the financial system was unwarranted. But now data has come out showing that the real economy started cliff diving before the financial system started to unravel.

From the New York Times….

The retail sales report, released by the Commerce Department, showed that automobile sales took the biggest hit last month, falling about 4 percent. A broad range of products sat unsold in stores as well, including furniture, electronics, and clothing. At department stores, sales fell 1.5 percent.

“There is almost nothing positive to say about these figures,” Rob Carnell, an economist at ING Bank, wrote in a note.

Even a sharp drop in gasoline prices did not lure Americans back to the mall. A measure of inflation at the producer level, the Producer Price Index, fell 0.4 percent in September as energy prices fell on the back of cheaper oil.

But prices for many other products stayed high; outside of energy products, businesses and wholesalers paid 0.4 percent more for finished goods in September than in August, according to the Labor Department.

In the last year, producer prices are up 8.7 percent, a big jump and a sign of faster inflation. Even outside of gasoline, prices are up 4 percent for the year.

A measure of conditions in the manufacturing industry, released by the Fed on Wednesday, plunged to the lowest level since the survey began in 1991. The Empire State survey dropped to minus 24.6 as demand for factory orders plummeted in October. The reading was at minus 7.4 in September.