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WASHINGTON–The number of people receiving unemployment benefits in the United States has reached an all-time record, the government said Thursday, and more layoffs are spreading throughout the economy.

The Labour Department reported that the number of Americans continuing to claim unemployment insurance for the week ending Jan. 17 was a seasonally adjusted 4.78 million, the highest on records dating back to 1967. That’s an increase of 159,000 from the previous week and worse than economists’ expectations of 4.65 million.

As a proportion of the work force, the tally of unemployment benefit recipients is the highest since August 1983, a department analyst said.

The total released by the department doesn’t include about 1.7 million people receiving benefits under an extended unemployment compensation program authorized by Congress last summer. That means the total number of recipients is actually closer to 6.5 million people.

Businesses continued to hemorrhage jobs Thursday. Ford Motor Co. reported a fourth-quarter loss of US$5.9 billion and said its credit arm would cut 20 per cent of its work force, or 1,200 jobs. Eastman Kodak Co. said it’s cutting 3,500 to 4,500 jobs, or 14 to 18 per cent of its work force, as it posted a $137 million quarterly loss on plunging sales of photography products.

In another sign of the deepening recession, the Commerce Department said Thursday that new orders for durable goods dropped by 2.6 per cent last month, even worse than the two per cent decline economists expected. Orders fell 5.7 per cent for the year, the second biggest drop on government records, exceeded only by a 10.7 per cent plunge in 2001.

The financial markets fell on the news. The Dow Jones industrial average dropped about 110 points in morning trading.

The tally of Americans filing new jobless benefit claims rose slightly to a seasonally adjusted 588,000 last week, from a downwardly revised figure of 585,000 the previous week. That also was worse than analysts’ forecast of 575,000 new claims.

The number of initial claims is close to the 26-year high of 589,000 reached in late December, though the work force has grown by about half since then.

The record number of ongoing benefit claims is an indication that laid-off workers are having a difficult time finding new jobs, economists said.

"This highlights the key point that the trend in gross hirings has slowed as abruptly as the trend in gross firings payday loan… has risen," Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote in a research note.

A year ago, continuing claims stood at about 2.7 million, less than half their current level when the extended unemployment program is included.

Abiel Reinhart, an economic analyst at JPMorgan Chase, said the report indicates the unemployment rate likely rose this month. January’s figure will be released Feb. 6.

The rate jumped to 7.2 per cent in December, a 16-year high. Employers cut an average of 510,000 jobs in the last three months of 2008, and may cut a similar amount in January, Reinhart said.

The crush of new and continuing claims has overwhelmed many states’ ability to process them all. Electronic filing systems crashed in three states earlier this month, and last week Michigan said it would hire 276 workers and open a fourth call centre to handle increased phone traffic.

President Barack Obama’s $819-billion economic stimulus package, approved by the House Wednesday and now on its way to the Senate, would provide $500 million to the states to upgrade their unemployment insurance systems. The measure also continues the extended unemployment compensation program, which adds up to 33 weeks of benefits, until the end of the year.

Companies have announced a huge number of layoffs this week as they prepare for an extended period of economic weakness. Economists expect the current recession, which began in December 2007, to be the longest since the Second World War.

Starbucks Corp. on Wednesday said it would cut 6,700 jobs. The coffee company also said it would close 300 underperforming stores, on top of 600 it already planned to shut down.

Time Warner Inc.’s AOL division is cutting up to 700 jobs, or about 10 per cent of the online unit’s work force. And IBM Corp. has cut thousands of jobs in its sales, software and hardware divisions in the past week, without announcing specific numbers.

Boeing Co., Pfizer Inc., Home Depot Inc. and other U.S. corporate titans also have announced tens of thousands of job cuts this week alone.

Companies have announced about 130,000 layoffs in January, according to an Associated Press tally.

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India’s central bank lowered its growth forecast and signaled further cuts in interest rates from record lows to encourage lending and spur economic expansion.

Asia’s third-largest economy may expand 7 percent in the year to March 31, compared with a previous estimate of between 7.5 percent and 8 percent, the Reserve Bank of India said today. The growth forecast has a “downward bias,” said the bank, which maintained its reverse repurchase rate at 4 percent and the repurchase rate at 5.5 percent.

Governor Duvvuri Subbarao said commercial banks, which haven’t followed his four rate reductions since October, should cut lending rates to help spur growth. The global recession has “amplified” risks to an economy the central bank says may expand this year at the slowest pace since 2003.

“The case for a further rate cut is strong,” said Tushar Poddar, a Mumbai-based economist at Goldman Sachs Group Inc. “There is little room for substantial fiscal expansion and that leaves a greater burden on the central bank.”

Bonds fell after the announcement, with the yield on the benchmark 10-year government bonds rising to 5.85 percent as of 11:25 a.m. in Mumbai from 5.82 percent before the decision. Stocks maintained their gains, with the Bombay Stock Exchange’s Sensitive Index up 2.4 percent.

‘Considerable Room’

“To arrest the moderation in growth, it’s critical that banks expand the flow of credit to productive sectors of the economy and do so at viable rates,” the central bank said today. “The policy easing done by it in the last few months allows for considerable room for banks to respond more actively to the policy cues.”

Lending rates for the best corporate customers at ICICI Bank Ltd., the nation’s second biggest, stand at 16.75 percent, reflecting only one 0.5 percentage point cut. The central bank’s repurchase rate, at which it lends to commercial banks, has dropped by 3.5 percentage points since October.

Commercial lenders have been slow to follow the central bank’s lead in cutting rates because they are still paying high interest on deposits following the RBI’s efforts to control inflation by raising interest rates to a seven-year high in July.

Monetary policy is the main tool available to authorities in India to support growth as public debt the equivalent of four-fifths of gross domestic product limits the government’s ability to step up spending.

Stimulus Package

Governor Subbarao unexpectedly cut rates on Jan. 2 to coincide with Prime Minister Manmohan Singh’s second fiscal stimulus package since December.

Since January, data has confirmed Subbarao’s comments that the economy is slowing along with investment instant payday loan.

Exports, 14 percent of gross domestic product, sank 9.9 percent in November from a year earlier. Industrial production grew at half the pace between April and November than for the same period a year earlier.

“India cannot be expected to remain immune to a global crisis of this nature,” the central bank said in its report today. “India has rapidly integrated into the global system and has linkages through two-way movements of capital and finance.”

Foreign investors, who were instrumental in driving the Indian economy’s record 9.3 percent expansion in the three years to March 2008, are fleeing. Last year they pulled out $13.1 billion from Indian stocks after buying $17.2 billion of equities in 2007. India’s Sensitive Index, or Sensex, has dropped 10 percent so far this year, extending last year’s 52 percent slide.

Slowing Inflation

The argument that India’s inflation rate requires policy caution is also losing credence. Wholesale prices for the week ended Jan. 3 rose 5.6 percent, less than half the pace in August.

Subbarao today cut the central bank’s inflation forecast to below 3 percent by March 31, from 7 percent estimated in October.

Singh, who underwent heart bypass surgery on Jan. 24, has been coordinating with Subbarao since October to ensure investment doesn’t suffer from the global credit crunch. Investment typically accounts for about one third of growth in the $1.2 trillion economy.

The government has undertaken a $4 billion plan to invest in roads and ports, and on Jan. 2 increased the overseas investment limit in the local corporate bond market to $15 billion from $6 billion.

Singh is also under pressure to prop up the economy and prevent companies from scaling back production and firing workers before general elections scheduled for April and May.

Tata Motors Ltd., India’s biggest truckmaker, stopped production at a commercial-vehicle factory for six days this month. Hyundai Motor Co.’s Indian unit is cutting output and firing temporary staff. Indian exporters said this month they expect to cut about 10 million jobs by March.

“Ensuring job security is the main challenge before the government ahead of the elections,” said Rajeev Malik, a Singapore-based economist at Macquarie Group Ltd. “The mother of all monetary easing is still alive and kicking. It’s just that they took a pause today.”

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President Barack Obama’s top economic and national security advisers are pulling out of next week’s World Economic Forum conference in Davos, Switzerland, according to the meeting’s organizers.

National Economic Council Director Larry Summers and National Security Adviser James L. Jones were scheduled to represent the Obama administration at the conference, which begins Jan. 27. They withdrew today “with regret,” said WEF spokesman Mark Adams in an e-mail message.

Timothy Geithner, Obama’s nominee as Treasury secretary, also will not attend the meeting, Adams said. Geithner hasn’t been confirmed by the Senate, which may vote Jan. 26 on his nomination. A spokesman for Sheila Bair, chairman of the Federal Deposit Insurance Corp., said today that she also is withdrawing from the conference.

Obama will send senior adviser Valerie Jarrett instead, according to Adams payday loans for bad credit. Laura Tyson, a professor at the University of California, Berkeley, who advised Obama during the presidential campaign, is still scheduled to attend.

The event’s guest list includes more than 40 leaders including Chinese Premier Wen Jiabao and Russian Prime Minister Vladimir Putin, 17 finance ministers and 19 central bankers.

Conference organizers were hoping for a big turnout from the new U.S. administration at this year’s meeting. “If I had a wish, it’s that we see an essential and crucial American presence,” Klaus Schwab, executive chairman of the WEF, told Bloomberg in December.

Spokesmen for the Obama administration did not immediately respond to calls for comment.

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At least one-quarter of House Democrats’ proposed $825 billion economic stimulus plan wouldn’t be spent until at least 2011, according to a report that suggests the package may take longer than expected to boost the economy.

A Congressional Budget Office analysis said most of the plan’s $355 billion in appropriations for programs such as highway construction wouldn’t be spent until after 2010. The government would spend about $26 billion of that money this year and $110 billion more next year, the report estimated. It projected the government would spend $103 billion in 2011, $53 billion in 2012 and $63 billion from 2013 to 2019.

The plan, crafted with President-elect Barack Obama’s economic team, is aimed at helping lift the economy out of recession through a combination of tax cuts for families and businesses and $550 billion in new federal spending on infrastructure projects, expanded jobless benefits, renewable energy initiatives and scores of other initiatives.

The report, e-mailed to reporters by Senate Minority Leader Mitch McConnell’s office, only analyzed the discretionary section of the plan and didn’t examine the $275 billion worth of tax cuts or approximately $195 billion in mandatory spending changes such as increased jobless benefits.

It suggested that much of the stimulus may not come until after the economy has begun to recover fast payday advance. The Congressional Budget Office has said it expects a “slow” recovery to begin later this year and that the economy will expand by a “modest” 1.5 percent in 2010.

Highway Construction

The report said the government would spend less than $5 billion of the $30 billion provided for highway construction in the next two years. The government would be able to spend less than $3 billion of the $18.5 billion provided for energy efficiency and renewable energy programs by the end of next year, the study said.

The timing of spending on different programs would vary because some, such as building a highway, take longer to implement than others, such as providing bigger unemployment assistance checks.

House Appropriations Committee Chairman David Obey, a Wisconsin Democrat, declined last week to say how quickly he believed the government could spend the stimulus money. He said that while lawmakers looked for programs that could be implemented quickly, they didn’t focus exclusively on “shovel- ready” projects because they also wanted to address longer-term problems.

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Renewed questions about U.S. banks' viability are pushing regulators toward a new plan that would remove toxic assets from bank balance sheets, in what may become the biggest effort yet to unfreeze lending.

President-elect Barack Obama's advisers see an increasingly grave banking crisis and are considering proposals far more sweeping than any steps that have been taken so far, according to people who've discussed the outlook with them.

“They need to do something dramatic,” said Harvard University Professor Kenneth Rogoff, a former chief economist at the International Monetary Fund, and member of the Group of Thirty counselors on financial matters, a panel that includes Treasury Secretary-designate Timothy Geithner and Lawrence Summers, incoming director of the National Economic Council.

Federal Reserve officials are focusing on the option of setting up a so-called bad bank that would acquire hundreds of billions of dollars of troubled securities now held by lenders. That may allow banks to reduce write-offs, free up capital and begin to increase lending. Paul Miller, a bank analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia, estimates that financial institutions need as much as $1.2 trillion in new aid.

Other steps that may be under consideration include providing further guarantees for toxic assets that remain on the banks' books, as officials did for Citigroup Inc. in November and with a $118 billion backstop for Bank of America Corp. today, or purchasing selected investments. Federal Deposit Insurance Corp. Chairman Sheila Bair yesterday played down the alternative of nationalizing lenders.

Slump in Stocks

A move could come soon after Obama is sworn in on Jan. 20. Adding urgency to the deliberations is a deepening slide in financial shares. Citigroup yesterday sank below the level it reached when regulators mounted a rescue of the lender in November. Bank of America fell to an 18-year low as the company sought more aid from the government.

“A lot of the trouble in all this is that once you got into a financial mess, people don't know where the bodies are buried,” Paul Krugman, the Princeton University professor who won this year's Nobel Prize for economics, said in an interview with Bloomberg Radio. “People think 'Who knows what I'm getting into?'” by lending or trading with others, he said.

The Senate yesterday voted to allow the release of the remaining $350 billion from the Treasury's financial-rescue fund, giving Obama a source of funds to implement a new bank program.

The departing Bush administration used most of the first $350 billion of the Troubled Asset Relief Program for buying stakes in banks. The declines in bank shares show that the strategy has failed to shore up the banking system's solvency.

'Necessary' Initiative

A big new initiative “is going to be necessary,” said Peter Wallison, who was U.S. Treasury general counsel under President Ronald Reagan and is now a fellow at the American Enterprise Institute in Washington. “Once they have stable capital, once they feel they are not going to be run on by people who doubt the quality of their capital position, they will start lending.”

Obama's Treasury could use much of the funds to back a bigger Fed campaign to buy the illiquid assets, Wallison said. The FDIC, which has emergency authority to take “any action” with insured deposit-taking firms deemed necessary to counter “adverse effects on economic conditions or financial stability,” could also play a role.

In the case of Bank of America and Citigroup, U.S. officials opted to insure the illiquid assets on their balance sheets, without offloading them into any special units.

'Growing Burden'

“Troubled assets continue to mount at insured commercial banks and savings institutions, placing a growing burden on industry earnings,” John Bovenzi, the FDIC's chief operating officer, told lawmakers Jan. 13. It's “vitally important” to set up a program “capable of managing these assets until the economy and the banking industry are stabilized,” he said online instant cash advance.

Fed Chairman Ben S. Bernanke called for “a comprehensive plan to stabilize the financial system and restore normal flows of credit,” in a Jan. 13 speech in London. He outlined options including a bad bank, “which would purchase assets from financial institutions in exchange for cash and equity.”

Bernanke was in Europe for meetings with his counterparts from the world's largest central banks to discuss the state of the global economy and financial markets. He met with U.K. Prime Minister Gordon Brown the next day.

European policy makers are also struggling to restart lending in their region, with some considering purchases of toxic assets. The U.K. and Germany this week announced new programs to guarantee loans to companies.

'Time Bombs'

“Buying toxic assets from banks is a good thing because I think confidence comes back into the banking system when you are certain — or more certain — that you have no time bombs ticking,” said Josef Ackermann, chairman of the Institute of International Finance, the Washington-based group that includes most of the world's large banks.

Ackermann, who is also head of Deutsche Bank AG, Germany's biggest bank, said “the real challenge here” is determining the price at which to remove the assets. He added, in a conference call with reporters Jan. 14, that Deutsche Bank doesn't need to unload illiquid assets into such a bad bank.

Switzerland in October relied on the mechanism to aid UBS AG. The Swiss National Bank and UBS set up a special unit to buy as much as $60 billion in toxic investments from UBS. Zurich-based UBS provided $6 billion in capital, which will be used as first protection against losses. It isn't clear how stockholders or bond owners would be treated in a bad-bank scenario. In the case of UBS in Switzerland, there was no direct impact on either.

Paulson Abandoned

In the U.S., the initial proposal for TARP was to buy hard- to-value assets such as subprime residential mortgage-backed securities, debt linked to commercial mortgages and collateralized debt obligations. Departing Treasury Secretary Henry Paulson abandoned it in favor of capital injections as a faster method of deploying the funds.

A more radical alternative would be the nationalization of some banks. Sweden used that option during a crisis in the 1990s. It took over two of the most troubled banks, Nordbanken AB, now part of Nordea AB, and Gota Bank, which later became a unit of Nordbanken. In addition, the government created a bad bank that bought troubled assets at a discount, while leaving financial institutions to manage their more-liquid holdings.

Bair indicated government takeovers aren't being actively considered. “I'd be very surprised if that happened,” she told reporters in New York.

The Obama economic team has been signaling plans to take bold action soon after taking office on Jan. 20 to address the problems in the banking industry.

'Act With Urgency'

“We must act with urgency to stabilize and repair the financial system,” Summers said in a letter to Senate Majority Leader Harry Reid yesterday.

Summers declined to specify how Obama will use the TARP, except for a mortgage-foreclosure prevention effort of $50 billion to $100 billion.

“How do you use this next round of money in the most efficient and effective way? This is a Rubik's Cube of a problem where there is no easy solution,” said John Douglas, a former FDIC general counsel who is now a partner at the Paul, Hastings, Janofsky & Walker law firm in Washington. “Doing something sooner rather than later to instill confidence is important.”

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Ford wants to roll out a fleet of hybrid and plug-in cars over the next several years, but it does not want to go down the road General Motors is taking with the Chevrolet Volt.

The Volt, which is expected to go on sale late next year, will use purely electric power to drive the wheels, and a gasoline engine will only be used to generate electricity for longer range. But Ford engineers believe that using a gas engine that way won’t deliver both the fuel economy and performance customers want.

Instead, Ford wants to build fully electric vehicles - with no gas engine at all - as well as advanced hybrids, including plug-in hybrids, where the gas engine drives the wheels directly. Ford believes vehicles like these will better meet real-world needs.

"We just felt that regular hybrids, along with plug-in hybrids and full electric were just better alternatives for our customers," said Barb Samardzich, Ford’s vice president for global powertrain engineering in an interview at the Detroit Auto Show.

Customers who want all-electric drive can simply buy one of Ford’s upcoming electric vehicles, she said. The automaker plans to introduce a new battery-only electric commercial van in 2010 followed by a new all-electric small car in 2011. The electric car is expected to travel about 100 miles on a charge.

Drivers who want longer range can buy a hybrid or plug-in hybrid where gasoline power pushes the wheels much of the time. Fuel economy for a plug-in hybrid, according to Ford, would be about 120 miles per gallon.

Ford has said it would introduce several "next-generation" hybrids, including a plug-in, by 2012. "Next-generation" hybrids will have more advanced battery technology than today’s hybrids, Ford said, allowing for more efficient performance and less reliance on the gas engine.

Plug-in hybrids will operate like today’s hybrid vehicles - with both gasoline combustion and electricity driving the wheels - but they will be able to take in additional electric power by plugging into an outlet, which allows for such extremely high fuel economy

Ford experimented with its own prototype extended-range electric vehicle, like the Volt. Ford’s was called the Edge with HySeries drive. It used a hydrogen fuel cell instead of a gas engine to generate extra power, but the principal was essentially the same.

But to provide acceptable performance once plug-in power is depleted, Ford engineers believe a gas engine would have to be too large to provide the kind of long-range fuel economy customers want, Samardzich said.

The alternative, she said, would be to use an engine so small that performance would be compromised.

Tony Posawatz, vehicle line director for Chevy’s Volt program, disagreed with Samardzich. He insisted that the Volt will perform fine even when electric power was being generated by the car’s fuel-efficient 1 saving acount payday loans.4-liter engine.

"The only minor issue is in an extreme elevation," he said, "somewhere in Colorado, up a steep grade."

Posawatz called that a "less than 1% of the time issue" and said it was comparable to what drivers would feel with any small-engined car.

The Volt will by driven by pure electric power and will be able to travel up to 40 miles on plug-in power alone before needing to generate electricity on board. Chrysler has also said it is planning to have a line of such vehicles beginning next year.

Because 40 miles is farther than most Americans drive on the average day, GM and Chrysler boast that their vehicles could potentially go weeks needing little gasoline at all - if any.

Also, by starting with an extended range-electric vehicle, GM is maintaining maximum flexibility to follow where the market leads, Posawatz said. A vehicle like the Volt can easily be sold as a pure-electric vehicle by simply taking out the engine."

"It’s much harder to go the other way," he said.

Ford’s plan for a purely plug-in electric vehicle by 2011, followed by a plug-in hybrid in 2012, would put it behind the plans of GM and Chrysler. Those carmakers, as well as Japan-based Toyota and Nissan, have already announced plans to have plug-in electric vehicles on the market as early as next year.

"Ford, I think, is playing a bit of a card game," said James Bell, editor of the automotive Web site Intellichoice.com.

Ford is betting that gas prices probably won’t rise sharply in the next few years, Bell surmised. In the near term, the carmakers’ so-called EcoBoost engines - turbocharged engines with highly sophisticated fuel injection systems - will provide the greater fuel economy Americans want as gas prices rise gradually.

"If gas prices go down, Ford’s going to look like the cat with the canary in its mouth," Bell said.

Ford also simply tends to be more conservative, by nature, than GM, said Michele Krebs, a columnist for Edmunds.com’s AutoObserver.com Web site.

All of these plans are driven by future, stricter federal fuel economy standards, not by natural consumer demands, she said. Despite a lot of media buzz around electric vehicles, consumers would ordinarily only buy them when the price and capabilities genuinely met their needs.

"We’re moving into that era when it’s going to be legislated, so consumers will have to get on board," she said. 

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European confidence in the economic outlook fell to the lowest on record and unemployment rose to a two-year high, adding to pressure on the European Central Bank for more interest-rate cuts.

An index of executive and consumer sentiment dropped to 67.1 in December from 74.9 in the prior month, the European Commission in Brussels said today. That is the lowest since the index started in 1985. Separate data showed euro-area unemployment rose to 7.8 percent in November from 7.7 percent a month earlier.

European companies are cutting jobs and reducing investment in order to weather the first recession in the euro region’s 10- year history. A combined rate cut of 1.75 percentage points since early October and billions of euros in stimulus measures have failed to reverse the slide in confidence and data today confirmed the economy contracted for two straight quarters last year.

“It’s a real shocker,” said Martin van Vliet, senior economist at ING Bank in Amsterdam. “Today’s worse-than-expected data make an even more compelling case for the ECB to cut rates significantly further from here.”

Investors indicate they expect the central bank to reduce rates at least 50 basis points, or hundredths of a percentage point, at its next meeting on Jan. 15, Eonia forward contracts show. That would take the benchmark rate to 2 percent, which would be a three-year low.

Job Cuts

Paris-based Alcatel-Lucent SA, the world’s largest maker of fixed-line networks, last month said it will cut 1,000 more managerial jobs and take other measures to reduce costs by 1 billion euros ($1.4 billion) in each of the next two years. Corus, the European unit of India’s Tata Steel, said on Dec. 31 that it may cut the workweek of 6,400 workers by an average of one day, equivalent to eliminating 1,100 full-time jobs.

A measure of manufacturers’ confidence fell to a record-low minus 33 in December from minus 25 in November, the commission report showed, while consumers’ expectations of unemployment rose to the highest since December 1993.

The economic situation is getting “significantly worse,” Amelia Torres, spokeswoman for European Union Monetary Affairs Commissioner Joaquin Almunia, told journalists in Brussels today. “I hope we will be able to avoid massive job losses because of the recovery plan that we are setting up.”

In December, EU leaders pledged economic-stimulus steps worth 200 billion euros, or about 1.5 percent of gross domestic product, to combat the fallout from the financial crisis fast personal short loans. Torres said the government plans announced so far amount to about 0.9 percent of GDP, with Germany scheduled next week to approve a second package for that nation of up to 50 billion euros.

Struggling to Cope

Companies are struggling to cope with the economic downturn that began in last year’s second quarter and may extend through this year. Euro-area GDP shrank 0.2 percent in the third quarter from the prior three months, which saw a similar contraction, the EU’s statistics office said in a separate report today. In the fourth quarter it could contract 1 percent or more, said Ken Wattret, senior economist at BNP Paribas in London.

“Across the board, confidence is collapsing and the European Commission data are indicative of a massive contraction in output — imminently,” Wattret said in a note to clients. “The euro-zone economic-sentiment data for December reinforce our view that the economy is in meltdown.”

Exports from Germany, Europe’s largest economy, plunged 10.6 percent in November, the biggest drop since records for a reunified Germany began in 1990, the Federal Statistics Office said today, and manufacturing orders fell for a third month. Volkswagen AG, Europe’s biggest carmaker, said on Jan. 5 that its U.S. sales fell 14 percent in December.

‘Gloomy’ Outlook

The economic outlook is “gloomy” for both the U.S. and Europe, Nobel laureate economist Joseph Stiglitz told reporters in Paris today. “Things at the end of the year are probably going to be worse than they are now.”

Amid global concerns about deflation after a 70 percent drop in the cost of crude oil from a July peak, price expectations fell further last month, today’s survey showed. Manufacturers’ selling-price expectations dropped for a fifth month to the lowest level since June 2003. Data yesterday showed that producer prices fell the most in 27 years in November, dropping 1.9 percent from the previous month, an indication inflation will slow further.

“It serves as a reminder to the ECB that it’s facing a serious risk of undershooting its inflation target in the medium- term,” Van Vliet said.

Today’s GDP report showed that investment fell 0.6 percent in the third quarter in the first back-to-back decline since 2002. Household spending stagnated after dropping 0.2 percent in the previous quarter.

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India’s next administration needs to cut interest rates and unveil more stimulus packages to revive an economy growing at its slowest pace in six years, the prime minister’s top economic adviser said.

“The stance of policy will have to remain concerned with trying to counter the slowdown in the next year,” Montek Singh Ahluwalia, deputy head of India’s planning commission, told Bloomberg News in an interview in New Delhi. “The monetary and fiscal policy action will continue.”

Ahluwalia, 65, unveiled a plan on Jan. 2 to inject capital into banks and finance firms and allow overseas investors to double purchases of debt in the government’s second stimulus package in a month. On the same day, the central bank cut interest rates for the fourth time in less than three months.

The measures are intended to steer Asia’s third-largest economy through the “worst quarter” of the global slump as exports continue to fall and industrial output extends its first contraction in 15 years, Ahluwalia said. The world’s biggest democracy holds nationwide elections in April and May that may stymie policymaking at a time the world recession is deepening.

“The meltdown is so enormous that no matter what you do, it would be difficult to insulate the economy from slowdown,” said D.H Pai Panandiker, president of RPG Foundation, an economic policy group in New Delhi. Prime Minister “Manmohan Singh’s Congress Party is faced with its worst crisis as no party would like to go to elections with people losing jobs and companies shutting down plants.”

Cutting Jobs

Exporters in India have cut about 65,500 jobs as recessions in the U.S. and Europe, the nation’s biggest markets, damp overseas demand. Industrial production fell 0.4 percent in October, the first decline in 15 years, and exports plunged 9.9 percent in November after falling for the first time in seven years the previous month. Output at factories and utilities also contracted in December, according to ABN Amro Bank NV.

India isn’t alone in Asia in preparing more measures to revive growth. Singapore will bring its budget forward to January from February and China may announce a second round of policies as early as this month. South Korean and Malaysian leaders last week said they will take more steps to spur expansion if necessary.

“The first quarter of the year is conceivably going to be the worst,” Ahluwalia, who worked as an economist with the World Bank, said on Jan. 2.

Revive Lending

To revive lending and boost consumer demand at home, Reserve Bank of India Governor Duvvuri Subbarao has enacted the steepest-ever cuts in interest rates.

Subbarao has slashed the overnight lending rate by 3.5 percentage points and the borrowing rate by 2 percentage points since Oct. 20, helped by the decline in inflation to a 10-month low. The Reserve Bank also reduced the proportion of deposits banks must hold in reserve by 4 percentage points cash advance no faxing.

“The risks are clearly towards even more aggressive cuts as growth continues to falter and inflation declines rapidly,” said Tushar Poddar, an economist at Goldman Sachs Group Inc. in Mumbai. “We continue to expect growth to slow to 6.7 percent this fiscal and 5.8 percent in the next fiscal year.”

Inflation is unlikely to be a problem for at least another six to eight months, freeing policy makers up to revive the economy, Ahluwalia said. Growth in the $1.2 trillion economy is expected to slow to 7 percent in the year ending March 31 from 9 percent or more in the previous three years.

Fiscal Stimulus

“A lot will depend upon the fiscal stimulus in the next budget,” said Ahluwalia, who joined Singh’s economic team from the International Monetary Fund in 2004. “If there is no fiscal stimulus, obviously growth will be lower.”

The Jan. 2 policies spurred a rally in India’s 10-year bonds, pushing yields to record low today.

The yield on the 8.24 percent note due April 2018 fell 14 basis points to 4.93 percent before trading at 5 percent. The Sensitive Index had gained on the first two days of 2009 in anticipation of more measures, reversing a record annual slump.

Overseas stock market investors turned buyers on the first day of the year, reversing a record outflow of funds that sent the rupee to an all-time low. Last year’s sell-off underscored India’s increasing vulnerability to global crises.

The benchmark stock index rose 1.5 percent today and the rupee gained as much as 1.6 percent on expectations the stimulus measures will encourage overseas investors to boost holdings of local assets.

Financial Crisis

Trade represented 35 percent of India’s gross domestic product in the year to March 31, up from 21 percent in 1997-98, the year of the Asian financial crisis, according to the central bank. Investment accounted for a third of growth last quarter.

The credit crunch has also delayed financing for India’s $500 billion spending plan on roads, ports and other infrastructure, though India’s comparatively higher economic growth rates should lure investors back, Ahluwalia said.

The Singh government’s first stimulus package on Dec. 7 earmarked 200 billion rupees ($4 billion), or 0.3 percent of GDP, for infrastructure spending.

“It does look like growth in Asia will be 5 percent higher as compared with the U.S. and Europe,” said Oxford-educated Ahluwalia. “Unless the world remains completely crazy, it should be possible to finance investments of that order in one of the faster growing parts of the world.”

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