Retail sales in the euro zone fell much more than expected in October, highlighting consumer fears in the recession-hit bloc. Retail sales are a strong indication of household demand and falling private consumption has played its part in pushing the 15-nation area into recession. High inflation is one reason for a drop in consumer demand. But now that inflation is falling along with oil prices, another shadow is prompting consumers to keep their cash in their pockets: growing job insecurity.
Markets are now waiting for the European Central Bank to announce an interest rate cut of some 50 basis points – the third in a row – to help kick-start the economy. However, many economists believe a more aggressive cut is needed. Companies in both Britain and Germany are complaining that it is still difficult and expensive to borrow money, despite official interest cuts and huge bank rescue packages. The Bank of England is also expected to cut rates on Thursday.