Spanish industrial output plunges

Spanish industrial output fell by 15.1% in November, compared with the same month one year ago, the biggest fall on record and a sign of a deep recession.

Analysts had expected output in factories and mines to drop by 11%.

On Thursday, figures revealed that the country's unemployment rate hit a 12-year high in 2008 of 3 million.

Retail sales across the 15 nations that share the euro rose unexpectedly in November, defying the gloom that pervades the eurozone economy.

Manufacturing blow

Spain, which has enjoyed 14 years of consecutive growth, is expected to enter a recession in the fourth quarter. GDP growth fell 0.2% in the third quarter and analysts forecast a 0.8% drop for the fourth quarter.

The country has been particularly hard hit by the slowdown, partly because of the weakness in the construction sector.

The figures indicate that the problem is not just in the construction sector, but also in manufacturing.

The biggest fall in output was in durable goods like household appliances, which tumbled 23.9%. Consumer goods fell 9.4%.

This latest data reinforces expectations of an early cut in eurozone interest rates.

The European Central Bank is to meet next week to decide on the future level of rates and will be faced with a barrage of data indicating a worsening slowdown in the eurozone.

"The fourth quarter does look very, very bad. There has been a substantial contraction in all activity, not just in industry, but what we've seen this morning is this is not just a Spanish, but a pan-European story," said Juergen Michels of Citigroup.

"The difference for Spain is that the problem is exacerbated by its own internal problems of its housing market and a lack of competitiveness," he added.

Retail sales

Separately, retail sales across the eurozone in November rose 0.6% from October and fell 1.5% from a year earlier. Both figures were better than expected.

Europe's biggest economies did better than the average.

Retail sales in France, the eurozone's second-biggest economy, were up 1.8% month on month and 1.6% on the year.

Germany, the eurozone's largest economy, registered rises of 0.7% and 0.3% respectively.

Food and drink sales rose 0.5% on the month and fell 1.3% on the year.

But analysts said the outlook remained bleak.

"Monthly data can be volatile. It's way too early to talk about signs of a turnaround with unemployment only recently surging higher. The outlook is both bleak for production and household sides in Europe once unemployment continues to rise much higher and we have only just seen that starting in Germany," said Matthew Sharratt of Bank of America.

"It makes no overall change to the outlook. It will probably lead to a 50 basis point cut by the ECB next week but signs on the retail side that it's not all one way count against the hope they could do more than 50 basis points," he added.

Eurozone interest rates are currently 2.5%.