PARIS, Dec 16: European car sales slumped, inflation slowed and governments issued gloomy forecasts on Tuesday ahead of an expected record cut in US interest rates aimed at breathing life into the world’s largest economy.

Consumer prices in the United States plunged a record 1.7 per cent in November, raising fears of deflation that were echoed in Britain and France, which both reported sharp drops in their 12-month inflation in November.

“This disinflation movement is very brutal,” Nicolas Bouzou, head of Asteres, an economic consultancy, said in reference to the sharp slowdown in France’s inflation which he blamed on falls in world commodity prices.

In another round of economic gloom, US housing starts took a record 18.9 per cent tumble during November and European trade body ACEA reported a year-on-year plunge of 25.8 per cent in new car sales in Europe in November.

“The collapse has become clear,” said the Kommersant business newspaper in Moscow, referring to an industrial output slump during November of 10.8 per cent -- the worst result since the fearsome 1998 financial crisis.

The news from Russia’s ex-Soviet neighbour Ukraine was even more alarming.

Ukrainian President Viktor Yushchenko said economic contraction in the first quarter of 2009 could be as high as 10 per cent following a crisis in the banking system and a slump in demand for steel, Ukraine’s main export.

In Europe’s biggest economy, Germany, the Frankfurter Allgemeine Zeitung quoted a government memo saying contraction in 2009 could be three percent or more, which would be the worst recession in Germany’s post-war history.

South Korea also cut its 2009 economic growth forecast by one percentage point to three percent, with President Lee Myung-Bak telling the cabinet that “next year will be the most difficult year, especially the first half.”

And in Japan, French global luxury group Louis Vuitton announced that it was scrapping ambitious plans for a flagship store in central Tokyo, which had been set to rival its Paris outlet, because of a slump in demand.

The grim economic news came as the fallout continued from a massive alleged scam run by Wall Street figurehead Bernard Madoff, which could force some of the world’s biggest banks to wipe billions off their balance sheets.

London-based HSBC, Spain’s Santander and Fortis Bank Netherlands alone revealed potential losses of more than five billion dollars as a result of the pyramid scheme fraud, which has turned the spotlight on US market regulation.

European Central Bank (ECB) president Jean-Claude Trichet meanwhile urged Europe’s banks to pass on the ECB’s historic interest rate cuts to the eurozone economy, suggesting the central bank might mark a pause in the cuts.

Now “we have to get it in the real economy,” Trichet said late on Monday.—AFP