Economic storm clouds gathered again over Europe yesterday as a key survey showed German business sentiment at an eight-year low while the European Commission slashed its official growth forecasts.

But in the United States, there were signs of a fragile recovery as the country prepared for Thanksgiving with the closely watched University of Michigan consumer sentiment index showing its second monthly rise and new jobless claims falling to their lowest weekly level for two months.

By contrast, the fall in the respected Ifo institute's German business sentiment index to 84.7 in October from 85.0 in September showed that firms there were still reeling from the shock of the September 11th attacks.

Economists, who had looked to the index coming out unchanged to provide a faint harbinger of an economic upturn, reacted by calling for a further cut in euro-zone interest rates.

In France, whose economy has so far shown resilience in the face of the global slowdown, data showed that consumer spending dipped 0.4 per cent in October after a downwardly revised 0.1 per cent month-on-month fall in September.

"What we have seen up until today was the slowdown on the supply side - this is the first sign of it on the demand side," said Mr Normand Ludovic, economist at CCF.

Britain data showed business investment fell a provisional 4.1 per cent in the third quarter.