The euro zone will tumble into a brief recession for two quarters at the end of 2011 and early 2012, according to forecasts published jointly today by leading French, German and Italian economic institutes.
France's Insee, Germany's Ifo and Italy's Istat all lowered their forecasts from previous ones made in October. The three institutes now expect growth domestic product in the euro zone to have contracted by 0.3% in the final quarter of 2011, to be followed by a 0.2% contraction in the first quarter of 2012.
A recession is commonly defined as two consecutive quarters of contraction.
The institutes expect the 17-nation euro zone to then eke out 0.1% growth in the second quarter.
"Taking stock of the deterioration of business surveys since the summer, the euro zone is expected to undergo a short recession with GDP declining around the turn of the year and stagnating in Q2 2012," they said in a statement.
"Household consumption will be held back by fiscal consolidation and deteriorating labour market conditions," the institutes added forecasting it to have dropped by 0.1% in the fourth quarter and remain stagnant in the first and second quarters of 2012.
Investment is also expected to fall due to public cutbacks and private companies delaying projects.
Q3 euro zone growth less than expected
The European Union revised downwards today its figure for euro zone growth over the third quarter of last year, to 0.1%.
The previous figure given was 0.2% and detailed EU data showed that a drop on France's previously published growth rate between July and September, from 0.4% to 0.3%, impacted the revision in gross domestic product (GDP).
Economists are watching closely to see if the first estimate for the all-important final three months of 2011 shows the euro zone - home to some 330 million people across Europe - dipping into recessionary waters.
Data published today by the EU's Eurostat agency kept German growth for the period at 0.5%. Spain posted no growth, while Italy and the Netherlands each saw shrinkages, although the Dutch contraction was narrowed to 0.2% from the 0.3% initially indicated.
Difficult to compare on an exact like-for-like basis due to differences in statistical methodology, the EU said that the US posted 0.5% growth for the same time and Japan 1.5%.
