Munich, Nov. 21 (Bloomberg) -- German business confidence fell to the lowest in eight years in October, the Ifo institute's survey of 7,000 executives showed, evidence a shrinking U.S. economy is dragging Europe's largest economy into recession. ``We are very close to a recession,'' said Bernhard Wirmer, chief financial officer of Jil Sander AG, a clothing maker and retailer that pared its profit forecast on Thursday. ``It won't get better in the first half next year.'' European companies have announced about 455,000 job cuts this year, according to Bloomberg data. Epcos AG and Lufthansa AG said yesterday they will eliminate more jobs. Germany's economy, the world's third largest, didn't grow at all in the second and third quarters, the Bundesbank said. Ifo's index of western German business confidence fell to 84.7 from 85 in September. Economists had forecast a figure of 85.2. Confidence declined the most in almost three decades in September. ``Exports are falling and we saw a clear decline in investment,'' Hero Brahms, chief financial officer of Linde AG, said in an interview. ``The euro area will experience a recession in the fourth quarter and the first three months next year.''

U.S. Slowdown
Linde, the fourth-largest maker of industrial gases, last week backed away from a forecast that profit growth will outpace sales this year. MAN AG, a German truck maker, said today it will cut 6,000 jobs, or 8 percent of its workforce, by the end of next year to reduce costs. The euro was little changed at 88.05 U.S. cents after the survey was released. The yield on the 3 3/4 percent German bond maturing in 2003 rose 1 basis point to 3.35 percent. The yield has declined more than 1.6 percentage point this year. U.S. customers buy about 14 percent of Europe's exports and American companies are the largest foreign investors in the area. German exports, factory orders and industry production all fell in September. The world's largest economy shrank at an annual rate of 0.4 percent last quarter, the first contraction in eight years. U.S. imports declined for a sixth straight month in September and the trade narrowed to the lowest in 2 /12 years. ``Export growth has contracted markedly and business investment has stopped increasing,'' the Organization for Economic Cooperation and Development said Tuesday. The European Central Bank should consider further interest rate reductions if ``signs of additional slack'' emerge.

ECB Rates
The ECB lowered its benchmark rate a half point to 3.25 percent on Nov. 8, the fourth reduction this year. ECB officials this week suggested that's enough for now to boost confidence and economic growth. The region will have ``extremely low growth levels at the end of the year and the beginning of next year, but not a recession,'' ECB Vice President Christian Noyer said on Monday. ``I expect growth to bounce back to a solid level in 2002.'' Stock markets have more than recouped their losses after the Sept. 11 attacks. The Dow Jones Industrial Average has gained 11 percent while the Dow Jones Europe Stoxx 50 Index has increased 16 percent. The yield on the three-month Euribor interest rate future contract maturing in March has risen to 3.09 percent from as low as 2.81 percent on Nov. 12. The December contract yielded 3.31 percent, a sign investors don't expect more rate cuts this year. The U.S. Federal Reserve has pared borrowing costs 10 times this year while the Bank of England lowered credit costs seven times. ``The U.S. is hoping for a boost from tax cuts and lower interest rates -- that's missing here,'' Linde's Brahms said. The ECB ``must think about further rate cuts.''

Europe's Biggest Economy
Germany accounts for about a third of the gross domestic product in the dozen nations that use the euro and is the biggest trading partner for countries such as France and the Netherlands. The economy in the region will probably slow to 1.6 percent from 3.4 percent last year, the OECD said Tuesday. Factories, farms and mines in the 12 countries using the euro cut production 0.3 percent in the three months ending in September, the third straight quarterly decline, a report showed Tuesday. French consumers cut back on spending in October for a second month amid rising unemployment. Spending dropped 0.4 percent, twice as much as economists expected, the government said today.

Slowing Inflation
Slowing growth is helping rein in prices. Oil prices have declined about one third since the Sept. 11 attacks on expectations that the global slowdown will hurt fuel consumption. Inflation in the 12 euro nations slowed to 2.4 percent in October from 2.5 percent in September. Italy's inflation rate dropped to its lowest level in more than a year-and-a-half in November. German inflation slowed to 1.9 percent in November from 2 percent in October, a report later this week is expected to show, analysts said. ``There is certainly room for further ECB interest rate reductions,'' said Christoph Hausen, an economist at Commerzbank AG in Frankfurt. Munich-based Ifo, which is 50 percent funded by the government, asks executives each month about production, inventories, orders, prices and jobs. The index peaked at 107.3 in November 1990. The low was 75.7 in 1982.