As liquidity is returning to normal levels after the holidays, the world is entering into the most crucial months of one of the worst recession since 1946. Things may get worst before they will get better, as the economic contraction might deteriorate over the short term. The U.S. dollar, in the man time, appears to have found an important top and more consolidation is possible.

New year, old problems

The New Year is starting on tone of the old one, as the global recession is accelerating its natural course and entering into crucial period. Events should deteriorate further before they will get better. Layoffs could increase, while only minor improvements are expected over the short term. The Microsoft Corporation, as an example, might soon start to cut costs, which should take the form of letting contract employees go, albeit rumors about a large workforce reduction (15,000 people) appear to be overextended. In effect, Christmas sales have been disappointing.

In the week ending December 27th, they fell 1.8% from the previous year and the International Council of Shopping Centers (ICSC) is expecting sales for November and December to fall for the first time since 1969. The negative trend of consumes is confirmed by the Institute for Supply Management factory index (ISM), which declined more than expected in December to 32.4, the lowest level since 1980. Demand for cars and furniture is fading, while the new orders index tumbled, as prices reached to the lowest level since 1949.