Factories in China, India and Russia slashed output and jobs at a record pace last month in another sign the world's largest emerging markets were wilting under the recession that has gripped most industrialised nations.
Factory activity surveys in the US and Europe are expected to show steeper contractions in December, as demand collapses at home and crushes growth in many of the developing nations that rely on Western consumption.
Economists and policymakers had seen China, Russia, India and Brazil, with their vast markets and rising wealth, as the engines of growth that could save the world from recession. Those hopes are fading fast and forecasts are getting gloomier.
South Korea warned exporters that this year would be tougher than last year, and Singapore said its export-dependent economy may shrink two per cent next year. Citigroup said the city state's economy, a bellwether for global trade, would shrink 2.8 per cent, the steepest in its history.
And everywhere, from job losses at Chinese factories to the biggest drop in Korean house prices in five years, there were signs that the export slowdown was rippling through domestic economies.
"What is worrying is that the weakness has spread rapidly from the externally-oriented sectors to domestically oriented sectors too," analysts at OCBC Bank in Singapore said in a note after the country announced gross domestic product data.
In contrast to the rapidly darkening economic outlook, the mood in markets has brightened slightly. Having squirreled cash into safe havens for much of the past quarter, investors are eyeing assets pummelled in the financial turmoil of last year. Asian shares and the Australian and New Zealand dollars gained on Friday while the Swiss franc and US treasuries eased, in a tentative sign risk appetite was growing after a year in which €10 trillion was wiped off stock investors' books.
"It feels like we've passed through the eye of the storm," Robert Rennie, chief currency strategist at Westpac in Sydney said of the financial crisis triggered by US bank failures last year.
"That's not to say there isn't another storm on the horizon, but for the moment the intense pessimism of October and November seems to have eased."
For Chinese factories and policymakers looking to contain an economic slump, there was much cause for pessimism.
Manufacturing activity fell for a fifth month as the global financial crisis bludgeoned demand for exports, the Purchasing Managers' Index showed on Friday.
The index rose to 41.2, up from the record low of 40.9 plumbed in November, indicating that while manufacturing was still shrinking, the pace had slowed from November's record.
The output sub-index fell to 38.6, signalling the sharpest contraction in production since the survey was launched in April 2004.
"With five back-to-back PMIs signalling contraction, the manufacturing sector, which accounts for 43 per cent of the Chinese economy, is close to technical recession," said Eric Fishwick, head of economic research at CLSA, which publishes the index.
For Chinese policymakers worried about social stability the most alarming news may have been the employment sub-index, which showed factories shedding jobs at the fastest pace on record.
PMIs in Russia and India offered similarly grim readings with the headline, employment and output indexes sinking to record lows.
The contraction in Russian manufacturing is deeper than the slump during the 1998 financial crisis, which saw bank collapses and a default on sovereign debt.
In India, factories cut jobs for the first time in the survey's three-and-a-half-year history to reduce costs.
In all three countries, factories reported slumping export orders with recession chilling demand in their largest markets - the US, Japan and Europe.
Smaller Asian exporters are bracing for a double whammy from the collapse in Western demand and shockwaves rippling through major customers in Asia, China and Japan.
South Korea, which ships a fifth of its exports to China, said export growth this year would be about one per cent, the weakest since 2001. Exports last month dropped 17.4 per cent from a year earlier, more than economists had expected. Singapore's economy contracted at a seasonally adjusted, annualised pace of 12.5 per cent during the October-December quarter, following a revised 5.4 per cent decline in July-September.
The government cut its economic forecast to a range between a decline of two per cent and growth of one per cent this year, compared with a range that went from a contraction of one per cent to growth of two per cent predicted in November.
Citigroup said that forecast was still too optimistic.
"If we are correct, this year will mark the most severe recession in Singapore's history, surpassing the Asian Financial Crisis and the 2001 tech recession," said Citigroup economist Kit Wei Zheng.