Europe sustains modest growth

The 17-nation euro zone economy grew a modest 0.2% in the third quarter from the second, the EU said today, lifted by France and Germany. Germany and France, the euro zone's two biggest economies, grew 0.5% and 0.4% respectively, the European Union's statistics office Eurostat said, helped by consumer spending and business investments, particularly in Germany.

A nasty mix of inflation, slowing exports and rising unemployment in the euro zone bode poorly and many economists expect a mild recession in Europe from the fourth quarter. European Central Bank President Mario Draghi has also predicted a "mild recession" in the bloc by the end of the year. Euro zone industrial production figures released by Eurostat yesterday also pointed to a sharp contraction towards the end of the year and the risk of a double-dip recession.

The slide in output at euro zone factories was the biggest since February 2009 – when the economy was reeling from the worst financial crisis since the 1930s.

The worsening outlook could add to pressure for the European Central Bank to further ease its monetary policy in the hope of supporting the region's economy. The ECB cut interest rates by 25 basis points to 1.25% this month and many economists expect another cut in December.

Stagnation in Spain, Belgium and a contraction in the Netherlands and Portugal appeared to signal that worse is to come and a spurt in growth over the summer was temporary. Spanish figures last week showed the euro zone's fourth largest economy ground to a halt in the third quarter, pushing it close to recession, with elections only days away.

Euro zone GDP rose 1.4% in the quarter compared to the same period a year ago, partly helped by surprisingly strong industrial production in August, but that also marked the end of a two-year run of manufacturing growth.