meanwhile GDP data from Euro should signal the 16-nation shrunk during the fourth quarter of 2008.

But first Germany released today their retail sales for the month of January, retail sales dropped by an annualized 1.3 percent following a revised estimate of 0.4 percent and well below median estimates of a 0.7% drop, while retail sales fell 0.6% after a revised rise of 0.5% also below median estimates of 0.2 percent.

The German economy represents almost one third of the euro zone economy, and a recession in Germany and other major economies within the euro zone led the 16-nation economy into recession, while the ongoing financial crisis continues to weigh down on growth in the euro zone and all around the globe, leading the area to fall deeper in recession.

The euro zone economy probably shrank by 1.5 percent during the last three months of 2008 according to the preliminary GDP estimate which will be released today and inline with the prior advanced estimate, while the euro zone economy is expected to have contracted by an annualized 1.2 percent also inline with the prior advanced GDP estimate.

Falling domestic and global demand have been weighing down heavily on the euro zone economy, as their exporting sector continues to deteriorate, while domestic spending is also suffering as rising unemployment and further tightening in credit conditions continues to suppress spending, consumption is expected to have dropped during the fourth quarter of 2008 by 0.2% following the prior which pointed that consumption was unchanged.

The ECB will announce today their interest rate decision, where expectations signal the ECB will cut its benchmark interest rates by 50 basis points to 1.50 percent, the ECB has been stressing that they will not cut interest rates down to zero inline with other central banks around the world including the Federal Reserve Bank, and the ECB seemed rather reluctant as they continue to take a very cautious approach.

The ECB decided to hold their rates steady last month as they opted back then that it was too early to judge whether they need to cut interest rates or not, however since then the euro zone economy continued to fall deeper in recession, as the incoming data has been signaling.

Moving on to Europe’s second largest economy, the U.K. economy also remains on the receiving end of this crisis, as they continue to suffer the aftermath of the worst financial crisis since the Great Depression, where falling domestic spending, dropping house values and tightened credit conditions have been weighing down heavily on economic growth and indeed led the U.K. economy into the depth of a recession that seems to be deepening as we speak now.

The HBOS house prices index is expected to show that prices dropped by 2.0 percent in February following the prior rise of 1.9%, while compared with a year earlier house prices are expected to have dropped by 17.8% over the last three months compared with the prior drop of 17.2%.

The BoE will also announce their interest rates decision today, median estimates are signaling the BoE will cut its benchmark interest rates by another 50 basis points to 0.50 percent, as they try to salvage economic growth and fend off deflation risks amid the ongoing financial crisis and the deepening recession.

The BoE have been rather aggressive when it came down to monetary policy, as they continued to slash their interest rates in a bid to help revive economic growth in Europe’s second largest economy, however they failed so far inline with other central banks around the world, as the financial crisis proved to be “too big to handle”.

The BoE on the other hand are afraid that the financial crisis combined with the ongoing recession will indeed lead the economy into deflation, and accordingly they have been cutting interest rates so they will not have to be in the position where they also have to fight deflation.

Across the Ocean lies the core of this crisis, as the U.S. economy the world’s largest economy continues to fall deeper in recession amid the worst financial crisis since the Great Depression, where rising unemployment, tightened credit conditions, falling stocks and the ongoing slump in the housing market continue to lead the economy deeper in recession.

Yesterday the ADP employment report signaled that the private sector shed 697,000 jobs in February, as conditions worsened further amid the ongoing recession, the figure was rather worrying since it comes ahead of Friday’s infamous jobs’ report, which is expected to show that non-farm payrolls declined by 650,000 jobs in December, while the unemployment rates surged to 7.9 percent.

Non-farm productivity is expected to have dropped during the fourth quarter of 2008 to 1.0% from the prior rise of 3.2%, while unit labor costs are expected to have risen in the same period to 3.8% from 1.8% report in the prior estimate.

Meanwhile initial jobless claims are still expected to remain elevated as companies continue to lay off more employees; analysts predict that jobless claims to come at 650,000 down from the prior estimate of 667,000, while continuing claims are expected to rise to 5.155 million from the prior estimate of 5.112 million.

Meanwhile factory orders are expected to have dropped by 3.5 percent following the prior drop of 3.9 percent, economic activity continues to weaken further as the ongoing financial crisis is yet to find its bottom, financial markets remain highly disturbed and financial institutions continue to lose more and more, yet the problem does not end here, since more sectors are just falling apart and no solution seems to be anywhere near in the horizon!!!