The outlook for Europe's economy darkened today with euro zone business confidence falling to a three-year low.
A range of economic indicators across the continent also pointed towards recession.
Shrinking lending and rising unemployment in Germany, until now a mainstay for growth in the euro zone, added to the gloom.
Economists now say there is now no hope of growth for the region in the third quarter of the year.
The euro zone economy stagnated in the first three months of the year and contracted 0.2% in the next three months. Economists expect another contraction in the third quarter.
Two consecutive quarters of contraction is considered to mark recession.
Analysts said the European Central Bank's promise of bond buying and the German court ruling - endorsing the euro zone's permanent bailout fund - did a lot to calm financial markets.
But they point out that there is still the big issue of non-existent growth.
The European Commission's monthly economic sentiment survey showed the index for the 17 countries sharing the euro falling to 85 points this month from 86.1 in August. Economists had expected no change.
The European Commission's business climate indicator for the euro area, which points to the phase of the economic cycle, fell to -1.34 points in September from -1.18 in August, against market expectations of -1.19 points. The September reading was the lowest since October 2009.
More evidence of economic gloom in the third quarter came from European Central Bank data on lending to households and companies, which showed credit to the economy fell more than expected in August. Loans to the private sector fell 0.6% from the same month a year ago, data released by the European Central Bank showed today, coming in below the expectations for no change.
The flow of loans to non-financial firms fell €10 billion after rising by €8 billion in July. The monthly flow of loans to households showed a gain of €7 billion after a drop of €1 billion in the previous month.
Today's Commission sentiment survey showed euro zone sentiment in industry declined to -16.1 in September from -15.4 in August, and to -12 in the services sector from -10.8.
Germany, long the main engine of the euro zone economy, was suffering too. German unemployment rose for a sixth month in a row in September, suggesting domestic demand might not be able to compensate for weakening exports amid the euro zone crisis and power growth in the bloc's number one economy.
Joblessness remains near to its lowest level since German reunification over two decades ago, and the unemployment rate held steady at 6.8%, contrasting starkly with the sickly labour market in many peers, including France and Spain.
But it rose by 9,000 in September, as the global slowdown and the euro zone's three-year-old crisis weigh on exports and prompt companies to hold back on investment, and economists said they saw it rising more in the months ahead.
The Commission data showed sentiment among euro zone consumers - the buying public - fell to -25.9 from -24.6 and to -18.6 from -17.2 in retail trade. Construction was the only sector where confidence improved marginally, to -31.9 from -33.1 in August.
The data also showed that inflation expectations rose among producers, the services sector and households alike, potentially complicating any possible decision by the European Central Bank to cut interest rates and help the economy.
