A week of record lows for interest rates from one side of the world to the next as the Bank of England cut rates to the lowest in 315 years to 1.5%, in the same week that South Korea reduces its rate to a record low of 2.5%.

Some good news on the high street

JD Sports has bucked the trend over Christmas with their sales up by 2.8% and that it expected its full-year profits to be ahead of forecasts. JD Sports has outperformed the FTSE all-share general retailer’s index by 1% over the last year and in September 2008 the company reported – so it is good to see a company on the high street performing well.

The other companies that fared better included supermarkets like Waitrose where sales were up 41% in the week to 27 December. Sainsbury’s also reported a rise in sales of 4.5% (excluding petrol) from last year for the 13 weeks to 3 January and John Lewis’s sales rose by 27.4% in the week to 3 January – so maybe the interest rate cuts are having a positive effect on consumer spending.

UK manufacturing at a low point

The UK’s manufacturing output has fallen to its lowest level for 27 years which shows just how difficult things are right now for the UK economy. The output has fallen by 7.4% year-on-year which is the biggest fall since June 1981. This was reported in the same week as Nissan announces the loss of 1,200 jobs in Sunderland due to the slow down – Nissan’s Sunderland factory was once hailed as the future of British manufacturing.

Record job losses in the US

Job losses within one year in the USA were the worst they have been since the time of World War II with employers axing a staggering 2.6 million posts in 2008, with over half a million of those in December 2008! This level of losses in US jobs puts the percentage of unemployment up to 7.2%! A similar situation is growing in Spain with unemployment hitting a 12-year high in 2008 of 3 million with one million of those unemployed being added to the jobless list in 2008 alone!

A bizarre twist on the car sales front

Car Manufacturer BMW has seen the sale of its Mini brand rise by 4.3% in 2008, whilst the sale of BMW cars has fallen by 4.3%. However, what is strange in an economic slowdown is that sales of Rolls Royce’s is up, with sales of the Rolls Royce Marque increasing to 1,212 in 2008 (2007 1,010).

End of the week saw:
Stock exchanges:
FTSE 100: 4,449
DOW: 8,599
S&P: 890.35
Nikkei: 8,837

Currencies
UK Sterling £ to US Dollar $ 1.52339
UK Sterling £ to Euro € 1.13428
UK Sterling £ to Japanese Yen 137.425
UK Sterling £ to Aus $ 2.15682
US Dollar $ to Euro € 0.744575
US Dollar $ to Japanese Yen 90.2100

Commodities
Nymex Crude oil – $40.39
Gold – $854.50

The Anglo-Dutch steel firm Corus, which is owned by the Indian steel company Tata has asked the government for help to avoid redundancies.

There a number of issues at question here, not least whether governments should be bailing out companies in capitalist economies, as it goes against the capitalist grain. Already we have the banks knocking at the governments door for cash and we now have banks partly owned by the government (not least owning just under 58% of the Royal Bank of Scotland) and the car manufacturers on both sides of the pond looking at bail-out cash.

The worry is of where all this will end and how much of tax-payers money will be spent in propping up companies in this economic situation. As it is the UK government has already borrowed heavily and even more now with tax cuts at the same time as increased spending!

The other issue at question here is that we, the tax payer, are being asked to put in cash to a foreign owned company, which somehow does not seem right! If however Tata are prepared to give up shares in the company in return for cash then fare enough, however, the government will still be playing investor/entrepreneur with tax payers money and with a company that is not actually a British company.

The US car manufacturers are requesting bail-out cash and US congress will be voting on a $15 billion (£10 billion) package as early as today (Wednesday 10th December 2008) for the big-three car companies, which includes Ford, Chrysler and General Motors. In return for this cash the US government is expected to take non-voting shares in the companies and details some strict financial recovery plan for the companies.

The key question to ask is whether or not these companies were already struggling before the credit crisis amid foreign competition from places like Japan, and whether this bail-out cash will be a short-term fix for a larger problem.

As each day goes by we see more and more how the sub-prime lending disaster in the US is impacting more and more and I think that world governments and in particular the UK and US are finding themselves in new territory.

Chrysler has announced plans to invest $1.8bn (£964m) in new vehicle projects and plans to expand plant in Detroit.

Expanding the Jefferson North plant will allow more flexibility and higher output, said the firm.

The expansion will also create 400 jobs, said Chrysler’s president Tom LaSorda during a car event in Michigan.

The news comes as the car manufacturer has embarked on cost cutting plans, by reducing the workforce and capacity to offset a slump in sales.

“This investment enables us to produce a new generation of world-class vehicles that meet the demand of our consumers around the globe,” said Mr LaSorda.

The plant currently produces the most popular model in Chrysler’s line-up, the Jeep Grand Cherokee – but demand has been hit by high petrol prices.

Chrysler, Ford and GM have all been hit by falling demand for their vehicles – especially larger gas-guzzling models.

Consumers have been switching to more fuel-efficient models as the price of oil has risen sharply.

In particular, sales of minivans, trucks and sports utility vehicles have all dropped significantly.

Mr LaSorda also said the car firm has singled out $1bn in non-essential assets that the firm would be able to sell.

Chrysler was bought by private equity firm Cerberus after Daimler decided to walk away from its huge investment in 2006.

News reported by The BBC