European car sales continued their year-long slide in March, with only government handouts avoiding a steeper fall - while plunging industrial output and record-low inflation figures show the economy is still shrinking, according to statistics published today.

European car sales fell 9% in March from a year ago despite government subsidies to car buyers that have buoyed German, French and Italian purchases, the European auto manufacturers' association ACEA said today.

Households are avoiding big-ticket items in recession-hit Europe as consumer confidence is at all-time lows amid worries about job losses. Fears about weaker spending have spread through the economy, affecting manufacturers across the region.

Industrial production in February among the 16 nations that use the euro fell by 2.3% from January and 18.4% from a year ago, the EU statistics office Eurostat said. The entire 27-nation European Union posted a drop of 1.9% from January and 17.5% from a year ago.

Worst-hit was production of durable consumer goods and machinery and tools, Eurostat said.

Eurostat also confirmed that the euro-zone's annual inflation rate in March was at a record low of 0.6% as four euro nations reported deflation, or a real fall in prices.

Ireland saw prices drop 0.7%, Portugal posted an 0.6% drop, Luxembourg a 0.3% fall and Spain an 0.1% decline.

Eurostat said tumbling prices for transport fuel and heating oil were behind the inflation plunge, overcoming high prices for natural gas, restaurants and cafes and electricity.

European Central Bank President Jean-Claude Trichet has tried to depict falling prices as a boost to Europeans' purchasing power.

But sales of items such as cars continue to slide across Europe despite a turnaround in some markets.

March was the eleventh month in a row of declining car sales, dragging the first quarter of the year down 17% from the same period in 2008.

ACEA said a 39.9% sales surge in Germany, the region's largest car market, failed to compensate for sharp drops in Britain - down 30.5% - and Spain - down 38.7%. French sales were up 8% in March while Italy climbed only slightly, by 0.2%.

Germany, France and Italy are trying to support their car makers by stoking sales with a 'crash a wreck, cash a check' program that gives buyers money if they scrap an old car for a more fuel-efficient model.

This has boosted sales in those countries so far this year, but analysts fear that buyers are merely bringing forward purchases and sales will be slow later this year even if the economy improves.

EU consumer confidence surveys show that many people are shunning big purchases and are worried about rising unemployment. EU businesses say 4.5 million jobs could disappear this year.

Only one car maker - Italy's Fiat SpA - saw sales grow in March, by 14.3%.

All others saw sales slip. General Motors Corp. fell by 20.1% from a year ago, Toyota by 11.9%, Renault SA by 10.9%, Peugeot Citroen PSA by 9.1% and Ford Motor Co. by 7.7%.

Europe's No. 1 seller Volkswagen AG declined a more modest 0.3%.

German luxury car makers were badly hit. BMW sales dropped 20.8% and Daimler, which makes high end Mercedes cars, posted a 14.6% slump.

Some 1.5 million cars were sold across the European Union plus Switzerland and Norway in March compared to 1.6 million cars in March 2008.