From The Times
December 2, 2008

Desperate times call for zero rates from Fed

Gerard Baker: American view
It did not take long for a brief moment of hope on the US economic front to turn to ashes yesterday.

The weekend marked the beginning of the Christmas shopping season, with last Friday, the day after Thanksgiving, the busiest shopping day of the year.

Even a recession, it seems, cannot diminish the frenzy of the American consumer and Black Friday, as it is known, demonstrated, with frightening new ferocity, that the most dangerous place on earth is between an American and a bargain. A Wal-Mart employee at a New York store was trampled to death in the stampede, left unattended for crucial moments as shoppers got on with their business.

Leaving aside the death toll of one, early data from the weekend were mildly encouraging. Surprisingly, total sales seemed to be somewhat higher than they were a year ago, before recession hit. Spending at the big stores was up 3 per cent on a year earlier, according to ShopperTrak RCT, a research company that monitors such things, and a quick survey by the National Retail Federation found that American consumers spent an average of $372 per person on Friday, up 7per cent on a year ago.

Given that consumer spending seems to be in decline for the first time in at least 18 years, any positive signs from the shopping malls should be welcomed. The big retailers expressed cautious relief at the news, but they and analysts noted that the seasonal shopping spree doesn't always end as it begins - and most economists are still expecting slower sales between now and Christmas.

In any case, even the restrained economic joy was shortlived, overwhelmed by much more troubling news yesterday. On the first of each month the Institute for Supply Management (ISM) publishes its survey of manufacturing activity in the previous month; the report is always keenly watched as the most up-to-date reliable information about the state of the economy.

Yesterday's report for November was the grimmest in a generation.

The headline purchasing managers' index hit its lowest level since 1982. That news came on the same day that the body that “officiallyâ€