European consumer confidence fell to a 5 1/2-year low last month as companies fired workers, adding to signs the region's economy may shrink.
A European Commission survey of 25,000 consumers in the dozen euro countries showed confidence fell to minus 16 from minus 14 in November. Unemployment in Germany probably climbed to a 4 1/2-year high of 4.2 million in December, economists said ahead of a government report due out tomorrow.
Consumer spending, which accounts for more than half of the economy, is faltering as unemployment rises. PSA Peugeot Citroen, Europe's second-largest carmaker, forecast the car market will decline 2 percent this year and Renault SA predicted it may drop as much as 6 percent.
"There have been many job cuts lately in my field, so I am careful about what I spend," said Fabrice Fournier, a 28-year-old computer programmer shopping in Paris at FNAC, a retailer of books, compact discs and videos. He bought fewer Christmas gifts last year than the year before.
Europe's US$7 trillion economy may contract as much as 0.2 percent this quarter, the European Union estimates. Companies from ASML Holding NV, Europe's largest semiconductor equipment maker, to Commerzbank AG are shedding jobs.
Germany's benchmark DAX Index fell 1.1 percent to 3123.6 at 12:15pm Frankfurt time. The DAX slumped 44 percent last year.
"I'm out of a job for the time being, so a `new' second-hand car is out of the question," said Bob Verschuur as he pushed his broken-down 14-year-old Volvo to the side of an Amsterdam street.
European unemployment stayed at 8.4 percent in November, the highest in almost two and a half years, a separate Eurostat report showed. Producer prices fell 0.3 percent in November and were up 1.1 percent in the year.
German retail sales fell the most in November in more than three years, figures today showed. Metro Group, Germany's largest retailer, said last week it expects the economy to remain "unfavorable." The HDE retail association lowered its 2003 sales forecast to a decline of 1.5 percent, from an earlier estimate of a 0.5 percent drop.
Carrefour SA of France has been cutting prices on goods as diverse as bicycles and duck liver pate to win customers from rivals. Europe's largest retailer promised to pay customers 10 times the difference in price if they could find Christmas toys cheaper elsewhere in France.
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