The global economy lurched closer to recession in September, judging by the almost co-ordinated series of hits to manufacturing in some of the world’s major economies. The world’s major economies now seem to be slowing much faster than previously thought.

In fact some economists reckon that there was an outright slowdown in September thanks to the impact of the latest eruption in the credit crunch and the lending freeze that developed as Fannie Mae/Freddie Mac were bailout out and then a succession of crisis starting with Lehman Brothers failure in the middle of the month.

It’s a reminder that will fall on deaf ears and closed minds in Washington and other countries where people oppose the $US700 billion bailout and want to push Wall Street and banks and financiers generally.

The size and spread of the global slump makes it clear that economies are already adjusting to the possibility of a collapse in finance: the jobless queues will surge from now on.

Economists say the near uniform bad news in these reports increases pressures for rate cuts across the globe, starting in Australia next Tuesday.

Manufacturing surveys in Japan, Europe and in the US made for unhappy reading: China showed a small gain; in Australia our manufacturing sector drifted in negative territory in September with no real improvement apparent.

Shares in major manufacturers like GE, Caterpillar and Honeywell fell after the September Institute for Supply Management’s (ISM) manufacturing index showed activity in the sector running at levels close to those associated with a recession.

The reading was 43.5 in September, down from the August’s of 49.9. It was the lowest reading since the 40.8 measure in October 2001, the month following the terrorist attacks on New York and Washington.

Economists had been forecasting a reading of 49.5, so they were stunned at the sharpness of the fall (50 points is break even in these surveys with readings above that indicating optimism and expansion and below indicating pessimism and contraction in activity). The index has averaged a reading of 49.6% for the past year, so the September outcome is a significant lurch downwards in pessimism and activity among manufacturers, who have been keeping the US economy alive with strong gains in exports.

In Japan sentiment among large manufacturers in the Bank of Japan’s quarterly Tankan survey went negative for the first time since June 2003, continuing a trend of falling confidence that has seen the economy contract in the second quarter of 2008 and exports and industrial production fall sharply. Exports to the US fell 22% in August as car companies slashed local production and exports. Unemployment in japan hit a four year high of 4.2% in August and the economy seems to be worsening faster than forecast.

In the eurozone, the purchasing managers’ index for September was confirmed at a reading of 45, down sharply from from the ‘boom like’ 53.2 outcome a year ago. Economists say that in this survey a figure above 50 indicates a majority of the survey’s respondents are reporting rising output while anything under 50 suggest contraction.

In Britain, a survey like the PMI slumped from 45.3 in August to 41 last month, the weakest on record. The housing and retail slumps in Britain are hurting manufacturing, which is now being further whacked by slowing activity levels in Europe and the US, its two major markets. not even a 12%-plus fall in the value of the pound has helped, unlike the US where the weaker greenback stimulated a surge in exports that is now starting to fade.

US economists reckon that the last time the country’s manufacturing sector felt this sick was back in early 2001 when then Fed chairman, Alan Greenspan cut interest rates outside a regular Fed meeting by 0.50% and kept cutting, helping to ay the groundwork for the credit boom and bust!

The last time the US experienced such a sudden drop in its index was in January 2001, and helped prompt the Federal Reserve under Alan Greenspan, its then chairman, to cut rates by half a percentage point outside a scheduled meeting.

China’s PMI index rose to a reading of 51.2 from 48.4 in both August and July. They were lowered by the slowdown engineered to accommodate the two Olympics in Beijing. But it was still sharply lower than the April level of 59.2.

Australia’s PMI in September was relatively stable in September, up by 0.2 points to 47.2 and but still under the 50 level separating expansion from contraction.

The Australian Industry Group said that manufacturing activity fell for a fourth successive month in September, thanks to higher official and commercial interest rates squeezing consumer and housing-related demand; slower trading partner growth, especially in Asia. Production fell again in September, though at a slightly slower rate than in August, in line with continued declines in new orders

Meanwhile the giant General Electric group got a capital injection from Warren Buffett as it struggles: it also revealed plans to raise up to $US12 billion in new capital, including Buffett’s $US3 billion. Buffett also has warrants for a similar sized injection over the next five years, and like his $US5 billion deal with Goldman Sachs last week, he will get a 10% return on the preferred shares and GE can buy his shares back by paying a 10% premium.

Expensive money some might say, but when its tough to get cash and you need to convince others, it pays to have the man in the Big White Hat riding his faithful horse, Berkshire Hathaway on your side, as Goldman Sachs found last week

GE’s reputation has been battered by slumping retail and housing demand for its whitegoods and lighting products and falling demand for its capital goods. But it’s been its financial division and its motley collection of subprime loans and associated credit securities, commercial property deals and corporate loans that have investors increasingly worried.

And finally: SHOCK! Economic good news. The Australian trade surplus is healthy. The Australian Bureau of Statistics this morning reported that the August trade account has seen our emerging surplus soar, thanks to the falling price of oil and oil-based products and the price rises for iron ore and coal.

The ABS said that in seasonally adjusted terms, the country earned a trade surplus of $1,364m in August 2008, a turnaround of $2,061m on a revised deficit in July 2008.

“The seasonally adjusted surplus was primarily due to the strong rise in non-rural and other goods credits and the fall in fuels and lubricants debits,” the ABS.

Exports hit a record $24.6 billion in the month, up nearly $1.5 billion while imports tumbled by almost $600 million to $23.2 billion because of the fall in oil prices.