Eurozone retail sales slump 2.1%

Shoppers look at a pre-Christmas sale at a leather goods shop in Milan

Retail sales across the 15 nations that share the euro fell more than expected in October, increasing the likelihood of a cut in interest rates this week.

Sales across the eurozone declined 0.8% on a month-by-month basis in October, and by 2.1% from a year earlier, more severe than analysts had expected.

A separate business activity survey said output levels had worsened.

The European Central Bank (ECB) is widely expected to cut rates from the current 3.25% level on Thursday.

Last month it reduced rates by half a percentage point, and ECB president Jean-Claude Trichet said further cuts could not be ruled out as Europe aims to limit the economic downturn.

‘Renewed deterioration’

Figures from Eurostat showed inflation in the eurozone fell to 2.1% in November, from 3.2% the month before, furthering the chance of a rate cut.

The eurozone service sector is being hit ever harder by the financial crisis, muted consumer spending and markedly weaker activity in key export markets IHS Global Insight economist Howard Archer

“Worries about the outlook for the economy and the labour market are probably prompting households to save relatively more,” said Nick Kounis, chief European economist at Fortis Bank.

“This leaves High Street activity heading for a renewed deterioration in the fourth quarter following the improvement seen in the third.”

Retail sales in September had been flat compared with August, and down 1.4% on an annual basis.

‘Horrible survey’

The separate business activity data came from research group Markit.

It has revised its purchasing managers’ index down to 38.9 points in November from its first estimate of 39.7.

Any figure less than 50 representing a contraction, and the latest number compares unfavorably with the 43.6 figure in October.

Fortis’ parallel service sector activity index also fell further than first estimated in November, down to 42.5 points from the initial 43.2 points figure.

“This is a horrible survey across the board, showing that the eurozone service sector is being hit ever harder by the financial crisis, muted consumer spending and markedly weaker activity in key export markets,” said IHS Global Insight economist Howard Archer.

European shares were down in Wednesday trading, with Germany’s main Dax index 1.8% lower, and France’s Cac falling 1.6%.

EU calls for aid to poor nations

Poor countries are also being hit by the financial crisis.

The European Commission President Jose Manuel Barroso has called for a ‘human rescue’ package to help poor countries.

Speaking at the opening of a high-level UN conference on aid, Mr Barroso said it would be ‘obscene’ to neglect the human cost of the global slowdown.

The UN Conference on Financing for Development is meeting in Doha, Qatar to track progress on development aid.

There are fears that rich countries will cut back on development aid as a result of the looming recession.

Mr Barroso said that climate change, energy security and trade would add to the potential problems facing poor countries as result of the financial crisis.

The World Bank has said that developing countries are facing a ‘perfect storm’, with the convergence of slowing growth, a withdrawal of private capital, and higher interest rates on their debt.

The Bank says that growth in developing countries will fall by two percentage points to 4.5% next year, as the volume of global trade contracts for the first time since 1982.

But aid agencies have criticized the fact that neither the head of the World Bank or the IMF, or many other world leaders from rich countries, have come to the talks.

“The fact that so few world leaders have chosen to travel to Doha is a real cause for concern,” said Ariane Arpa of Oxfam.

Promises, promises

Six years ago, rich countries pledged to double their aid efforts to ensure that the poor countries reach their millennium development goals of halving poverty by 2015.

But UN figures show that the developed countries have only committed $20bn of the $50bn they promised at the G8 summit in 2005, leaving them far short of the $130bn that will be needed if the millennium development goals are to be met.

World Bank president Robert Zoellick said he would accelerate the disbursement of $42bn it has available to support low-income (IDA) countries over the next three years.

But Christian Aid and ActionAid are concerned that the present financial crisis will be used by rich countries as an excuse to renege on aid commitments.

The mood of the meeting is likely to be in sharp contrast to the first Financing for Development summit in Monterrey, Mexico, in 2002, when President George W Bush unexpectedly promised to double US development aid.

Developing countries are also looking to play a bigger role in discussions designed to restructure the world financial system.

The G20, which met in Washington earlier in November, includes some major emerging market countries, but does not represent the very poorest nations.

Some developing countries and aid agencies would also like the meeting to tackle the issues of tax evasion by multinationals and capital flight.

Meanwhile, discussions will be taking place in Geneva about plans to re-launch the world trade talks, which stalled in the summer because of a dispute over farming tariff protection for poor countries.

WTO boss Pascal Lamy has said it is essential that world leaders show their commitment to developing country growth through aid and trade.

Financial crisis: The end of optimism

The hits just keep on coming. Between Oct. 6 and Oct. 10, the Dow Jones industrial average plunged more than 1,800 points, as forced sell-offs led to one of the biggest drops in the history of the index. Major markets are now down between 30% and 40% from last year. For anyone managing money or a business, or hoping to retire soon, it is a distressing, anxious time. The mood, on Wall, Bay and Main streets, is bleak.

Small wonder. After all, even the experts have been thrown off balance. Ben Bernanke, the head of the U.S. Federal Reserve, seems to be innovating policy on the fly, along with policy-makers around the western world. Multibillion-dollar economic decisions that would otherwise have involved years of debate are being made in minutes, between just a few people, and behind closed doors. And so actions that are designed to instil confidence end up working in reverse.

These are not normal times. The global financial system is in shock, and central bankers are trying to keep the body warm until the vital organs — credit markets — start working again. But the shock waves from the financial sector are just now beginning to move into the real economy. That suggests we’re going to see disappointing earnings, budget chaos, shutdowns and layoffs in the months ahead. We are also going to see the cost of capital rise as the economy enters a period of lowered expectations. It’s going to be harder to do business at every level.

To help you navigate the turbulence, we’ve prepared an emergency response kit: Where do you put your money? How do you manage your company through this? What are small businesses doing to shelter from the storm? And perhaps most satisfyingly: Who’s to blame for this mess?