By Angus MacSwan
LONDON (Reuters) - Steep falls in European industrial output underlined the severity of the world economic crisis on Friday and more grim news was on the way with the United States expected to report the biggest monthly job cuts in more than 30 years.
Asia also struggled with the downturn. The Bank of Korea cut its interest rate by 50 basis points to a record low of 2.5 percent and said Asia's fourth-largest economy was weakening rapidly.
China's business confidence plunged in the final three months of 2008 as exports and industrial output suffered.
U.S. President-elect Barack Obama said the U.S. economy could stay mired in recession for years without bold action. But he gave few new details about a package of tax cuts and public works spending likely to cost $800 billion or more.
"I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible," Obama said in a speech in Fairfax, Virginia on Thursday. "If nothing is done, this recession could linger for years."
Underlining his fears, the U.S. non-farm payrolls report due later on Friday, is expected to show December was the worst single month of job losses in 34 years and that 2008 produced the biggest job losses since demobilization following World War Two.
For December alone, job cuts are expected to amount to 550,000, taking the unemployment rate to 7 percent.
Companies are cutting jobs across the world because of the stranglehold on consumer and corporate funding since a long-running credit boom went bust a year and a half ago.
Equity markets traded slightly lower and the dollar edged up against a basket of major currencies on Friday as investors awaited the U.S. jobs data.
In Europe, British manufacturing output slumped at its fastest annual pace since the early 1980s and much more than expected in November, official data showed.
Output fell 7.4 percent year-on-year while the broader measure of industrial production fell 6.9 percent, both the weakest since 1981.
"These numbers are even worse than we expected and twice as bad as October," said Philip Shaw, chief economist at Investec.
The figures are likely to reinforce expectations that interest rates -- slashed to a historic low of 1.5 percent by the Bank of England on Thursday -- will fall to near zero in the coming months.
France's industrial output also continued its downward spiral in November, sliding a larger-than-expected 2.4 percent month on month on the back of further woes in the car industry.
"This is catastrophic, but sadly it reflects the reality of French industry," said Marc Touati, head of Global Equities in Paris.
The automobile industry has borne the brunt of the economic storm in France, with output dropping 8.1 percent in November after a dramatic 22.2 percent decline in October.
Underscoring the problems faced by the sector, French carmaker Renault on Friday posted a 4.2 percent drop in 2008 sales and said "inventory management and reduction" would remain a priority throughout 2009.
The picture was worse in neighboring Spain, with industrial output down a record 15.1 percent year on year in November and analysts said the pressure was building on the European Central Bank to cut interest rates again.
"The data is much worse that what the ECB was predicting as recently as four weeks ago," said Jacques Cailloux, an economist with Royal Bank of Scotland.
CAR MAKERS STRUGGLE
Along with trillions of dollars in government stimulus packages, central banks are cutting interest rates to unprecedented levels in an effort to kickstart growth and stem the rising tide of job losses.
The Bank of England cut on Thursday took the rate to its lowest level since the central bank was created in the 17th century. The Korean cut reflected the plunge in export demand and domestic consumption.
Hyundai Motor Co, South Korea's top automaker, said on Friday it plans to cut production at its domestic plants by 25-30 percent to offset a slump in demand.
Smaller local rival Ssangyong Motor Co said it was seeking court bankruptcy protection as the financial crisis further pounded the worldwide car makers.
Business confidence in China -- a star performer in the boom that preceded the crisis -- plunged in the final three months of 2008, an official survey showed. Manufacturers were hurt by shriveling U.S. and European demand and a weakening domestic property sector.
Japan's index of coincident economic indicators fell 2.8 points to a preliminary 94.9 in November from 97.7 in October, government data showed, signaling that the world's second-largest economy faces a deep recession.
In response to the crisis, the leaders of France and Germany called for a complete overhaul of the financial system and French President Nicolas Sarkozy said the United States should no longer be allowed to dominate the debate.
They said new institutions are needed to prevent a repeat of the financial crisis and make possible a fairer form of capitalism that does not lead to imbalances in wealth.
(Reporting by Reuters bureaux; Writing by Angus MacSwan; Editing by Ruth Pitchford)
