Eurozone growth divide set to widen

Eurozone economic growth slumped in the July-September period versus the previous quarter and is likely to slow further as the divergence between robust Germany and the weaker peripheral countries grows.

The European Union's statistics office said gross domestic product in the 16 countries using the euro grew 0.4 per cent in the third quarter against 1.0 per cent in the second three months. GDP expanded 1.9 per cent year-on-year.

Economists said the risk of another recession was small, but growth could slow to a quarterly rate of 0.2-0.3 per cent in the coming quarters and annual growth should ease to 1.1-1.4 per cent next year from an expected 1.7 per cent in 2010.

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"We expect eurozone growth to be muted over the coming months in the face of serious headwinds, most notably significant fiscal tightening increasingly kicking in, slower global growth and recurrent sovereign debt problems," said Howard Archer, economist at IHS Global Insight.

The slowing growth was also signalled by a slight fall in industrial production in September.