The world economy will shrink 1-2 percent this year, World Bank President Robert Zoellick forecast, as a slew of European and U.S. data pointed to declines in demand, production and employment on Thursday.
U.S. jobless claims rose to a worse-than-expected 654,000 in the week to March 7, and the four-week average rose to 650,000, its highest since October 1982.
U.S. retail sales slipped 0.1 percent in February, after a 1.8 percent rise in January.
The European Central Bank predicted global and euro zone demand would likely be very weak in 2009 and recover gradually in 2010, while euro zone inflation would remain well below its target of just short of 2 percent.
Prices at euro zone factory gates dropped much more than expected in January, pointing to more consumer price deflation and another deep rate cut by the ECB in April, while Europe's top business group warned of a sharp economic contraction.
The gloomy evidence of further declines in demand and production in the run-up to a G20 finance ministers' meeting in London this weekend hit equity markets and boosted bonds.
Following falls in Asian shares, the pan-European FTSEurofirst 300 index of top European shares fell 1.3 percent, and Wall Street also looked set to open lower after two days of gains, with the S&P futures down 0.8 percent.
The World Bank's Zoellick told Britain's Daily Mail he expected the global economy would shrink about 1-2 percent this year.
"We haven't seen numbers like that since World War Two, which really means the 30s, so these are serious and dangerous times," he said.
In the euro zone, producer prices dipped 0.8 percent month on month in January and 0.5 percent year on year, the EU's Eurostat said, both worse than poll forecasts.
"We expect the ECB to cut interest rates by a further 50 basis points to 1 percent in April," said Howard Archer, economist at consultancy IHS Global Insight.
Earlier, revised data from the world's second-biggest economy, Japan, showed the pile of unsold goods doubled in the fourth quarter, as its economy shrank 3.2 percent, the worst contraction since the 1974 oil crisis.
Any lingering hopes that China might keep the world's economy turning took another dent as its annual industrial output growth slowed to 3.8 percent in January and February, the slowest on record, and its exports plunged.
BE AFRAID
The world's biggest powers are expected to put on a show of unity at this weekend's G20 meeting, cloaking the reality that differences among them are likely to limit coordinated action.
So far, only a deal to increase resources for the International Monetary Fund to help battle the crisis looks on the cards, with countries still at odds over how to regulate markets or deal with banks' troubled assets.
For two decades self-regulation was the mantra for British and U.S. policymakers, but multibillion-dollar bank bailouts have pulled the rug from under the light-touch approach.
The chief executive of Britain's Financial Services Authority, Hector Sants, bared his teeth at a speech to London's financial community at Thomson Reuters offices.
"There is a view that people are not frightened of the FSA. I can assure you that this is a view I am determined to correct. People should be very frightened of the FSA," he said.
GRIM DATA
Economic data from Europe's top economies underlined the depth and persistence of the crisis on Thursday.
German industrial output fell a record 7.5 percent in January, its biggest drop since reunification in 1990, as production for the export sector dived, preliminary Economy Ministry figures showed.
A study obtained by Reuters from the German Federal Labour Office said recession could push the number of unemployed in Germany to 3.7 million this year, a sharp revision of its earlier prediction of 3.3 million.
In France, a rise in energy prices helped inflation bounce in February, but analysts said the jump was temporary and would soon succumb to a worsening jobs market that would sap consumer spending in the months ahead.
Italy's economy contracted at the steepest pace in at least 28 years in the fourth quarter, revised data showed on Thursday, led by sharp declines in consumer spending and investment.
In Britain, public expectations for inflation over the next 12 months fell to 2.1 percent in February from 2.8 percent in November, the lowest since May 2005, according to a quarterly Bank of England survey.
