Asian economies stumble; US faces sales test

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London: Asian economic powerhouses saw production tumbling on Friday, while in the United States Thanksgiving sales offered a key test of America’s ability to spearhead recovery from global crisis.

Euro zone inflation plunged to an annual 2.1% in November from 3.2% in October and unemployment rose faster than anticipated, to 7.7% in October from an upwardly revised 7.6% in September. The data boosted expectations of a deep interest rate cut by the European Central Bank next week.

Chinese insurer Ping Ang provided a striking illustration of the global nature of the crisis when, according to a government source, it asked China’s government to help seek compensation from Belgium over its losses in the European financial group Fortis after the group’s nationalization.

The worst crisis in decades, which has humbled major world financial institutions, continued to encroach on the broader economy, driving output cutbacks, unemployment and bankruptcies.

A major European builder, Austria’s Strabag, announced it would cut its investments by more than half next year. German industrial conglomerate ThyssenKrupp posted better than expected 2007-08 pretax profit, but gave no forecast for the coming year. The company said it could not rule out production shutdowns, shorter working weeks and layoffs.

Japan, the world’s number two economy, provided vivid evidence of the reach of the crisis, announcing a fall of 3.1% in industrial output for October, more than expected, with a drop more than twice as big predicted for November. Household spending fell 3.8% from a year earlier, also more than expected.

The speed at which Japanese firms are slashing production and consumers are scaling back their spending, surprised economists and suggested the economy was in for a deeper and longer recession than earlier thought.

“Production is falling much faster than we had expected. Companies are adjusting their production very quickly,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research. “The auto makers are the worst hit, but their turmoil is starting to spill over to other sectors, such as steel.”

Many will be looking this weekend to the United States, where the crisis began with a collapse in the U.S. mortgage market that saddled banks throughout the world with bad debt. America’s “Black Friday” sales, the day after Thanksgiving holiday, provide a strong test of consumer confidence, a major driver of the US economy. But the specter of unemployment could dampen spending despite price cuts in the runup to Christmas, a time that brings up to 40% of annual sales.

“Consumer spending on gifts for the holiday season is going to be down considerably,” said Eric Anderson, professor of marketing at the Kellogg School of Management, Northwestern University in Illinois. “Black Friday will be the first indicator of how bad it’s going to be. “

South Korea, Asia’s fourth-biggest economy, followed Japan’s pattern in reporting a sharp drop in factory output in October, leading some analysts to expect a full-blown recession rather than a slowdown projected by the authorities. India, like China a major contributor to global economic growth in recent years, reported better than expected growth of 7.6% in the third quarter versus a year ago. But the economy lost momentum from the previous quarter’s 7.9%.