Europe’s banks slash rates as recession hits, construction sector crashes, shares steady: Economy roundup

Europe’s central banks have cut their interest rates in a bid to help the region pull itself out of a recession.

Europe’s central banks have cut their interest rates in a bid to help the region pull itself out of a recession.

The European Central Bank has cut its official refinance rate by 75 basis points to 2.5% while the Bank of England has cuts its key interest rate to 2%, the lowest point since 1951, when Winston Churchill was prime minister.

Swedish and Danish central banks also lowered their official rates.

Gross domestic product in Britain fell by 0.5%, the first drop in 16 years, while the Organisation for Economic Cooperation and Develop says the British economy may retract by 1.1% in 2009.

Construction sector struggles

Back home, the bad news continues. The Australian Industry Group-Housing Industry Association Performance of Construction index fell 4.4 points to just 32 points – the second steepest fall ever.

The fall is also the ninth consecutive month the index has remained below the 50-point level that separates expansion from contraction. Housing building activity also retracted for a the 10th consecutive month.

“Most firms linked the reduction in total construction activity to the on-going economic crisis and poor market demand,” an accompanying report says.

“There were also reports that competition to secure contracts had intensified, resulting in a higher level of unsuccessful tenders and diminishing new project work.”

Market steady

The Australian sharemarket has opened 1% weaker, following declines on Wall Street overnight.

The benchmark S&P/ASX200 index was down 18.7 points or 0.53% to 3513.7 at noon AEDT. The dollar remains steady at US64 cents.

NAB shares have risen 2.3% to $19.91, while Woolworths gained 2% to $27.04. Telstra shares gained 1.5% to $4.15.

The Dow Jones industrial average fell 215.45 points, or 2.51% to 8376.24, while oil dropped 6% to below $US44 a barrel.