Leading indicators continued to point to a deteriorating economic outlook as the IMF again cut its forecast for growth in 2009. Confidence has been threadbare of late and such extraordinary times call for extraordinary actions. Right on queue, the US elected a new president and UK interest rates were slashed by an unprecedented 150bps, three times the cut in the Eurozone.

The Monetary Policy Committee (MPC) took unprecedented action last week, slashing interest rates by 150bps to 3%. In one fell swoop, the MPC took the Bank Rate to its lowest level since the 1950s. No one can accuse the MPC of gradualism - it was the largest one-day reduction in the Bank Rate in the history of the MPC. And it appears that they are not done yet. Markets are now expecting rates to fall below 2% by the beginning of next year. The accompanying statement left no doubt why the Committee thought it necessary to slash the policy rate. It made reference to the most serious disruption in the banking system for a century, and pointed to a "continued severe contraction" in output over the near term.

As if this wasn't enough, the International Monetary Fund (IMF) sharply revised down its forecasts for next year. The UK is expected to shrink by 1.3% in 2009 (from the -0.1% it projected a month ago), and to be the worst economic performer among the industrialised countries. In such a recessionary environment, firms will find it almost impossible to raise prices, highlighting the risk that inflation will undershoot the 2% target next year. Indicators of economic sickness are starting to light up. Company insolvencies have risen by 25% since last year in England and Wales. The rise is from a low base, as only 0.6% of active companies entered liquidation in the twelve months to Q3. Personal insolvencies also rose.

The IMF forecasts the US to contract by 0.7% in 2009. The Eurozone is likely to suffer slightly less, shrinking by 0.5%. Canada is the only developed economy which is expected to grow, by a meagre 0.3%. Highlighting the global nature of the slowdown, and for the first time since the Second World War, the developed economies as a whole are expected to contract (by 0.3%). Emerging markets were also downgraded, but China and India should still see a healthy pace of growth (8.5% and 6.3% respectively).

In the US, any optimism derived from Mr Obama's landslide victory will have been dented by a raft of very weak US data. The manufacturing ISM (a key leading indicator of growth) tumbled to a level not seen since the early 80s, suggesting that output in October contracted at the fastest pace in 26 years. The sharpness of the deterioration is startling - this survey was in line with its long run average as recently as July. If there was a bright spot, it was that input costs fell at the fastest pace since 2001.

With activity taking a tumble, US companies continue to shed staff. Employment fell by 240k in October, and September's fall was revised up from 160k to 280k - the largest fall since mid-2003. The unemployment rate jumped to 6.5% (from 6.1% in September), eclipsing the peak seen after the 2001 recession. With fewer people in employment and consumer confidence close to all time lows, it was no surprise that auto sales continued to slump. For the first time in 15 years, monthly vehicle sales fell below a million in October. Unemployment is likely to rise further meaning the outlook for consumer facing businesses will remain challenging.

In the Eurozone, the picture was equally bleak. As the financial crisis intensified last month, the European service sector had its worst month on record, according to October's PMI. Manufacturing did no better, recording its largest ever monthly fall on its way to a record low. September's industrial production (IP) declined for its fifth straight month in Spain while Dutch and German IP declined for the first time in five years. Further falls are likely as German industrial orders plunged by 8% in September and the PMI new business components dropped to series lows. The European Central Bank cut by 50bps bringing rates to 3.25%. Further cuts are likely and while President Trichet avoided the use of the "R" word, it is likely the region as a whole will be in recession next year.

It is becoming increasingly clear that no country can defy the economic headwinds blowing across the globe. Take emerging economies. Last weeks PMIs were equally pessimistic and recorded some of the largest ever declines. These countries are also being hit by increased risk aversion, leading investors to pulling money out, putting downward pressure on exchange rates. Governments have been intervening to stop currencies collapsing, but that drains foreign exchange reserves. Russia, Korea and India have all seen reserves fall by at least $30bn a month and despite these interventions emerging market currencies have still lost ground. For example, the Korean won has fallen 42% against the dollar since the beginning of the year.