PREVIEW - Euro zone likely bounced out of recession in Q3

A euro sculpture is pictured in front of the headquarter of the European Ce...

The euro zone economy probably leapt out of the worst recession on record in the third quarter as a raft of fiscal and monetary stimulus measures fed into a pickup in demand in the economy, according to a Reuters poll.

Economists surveyed over the past week were unanimous in thinking third quarter GDP in the euro zone returned to positive territory, even if they were unsure of the pace of growth coming after five straight quarters of contraction.

A Reuters poll of 39 economists showed the 16-nation economic bloc growing by 0.5 percent in the three months July-September, with forecasts ranging from 0.1-0.9 percent. That comes after the economy shrank by 0.2 percent in the second quarter and by 2.5 percent in the first.

A likely strong reading from the euro zone would follow other major economies including the U.S. and Japan that have already emerged from a deep global recession. And Germany alone is expected to grow by a robust 0.8 percent on the quarter.

The euro area data due on Friday will also likely contrast strongly with major trading partner the United Kingdom, which remained mired in recession in the third quarter, confounding every prediction by economists.

Yet there will be concern that a return to growth cannot be sustained at such a strong clip going forward, particularly as some economic stimulus measures are gradually withdrawn.

Indeed the Composite Purchasing Managers' Index for the euro zone published by Markit points to a very modest pace of expansion during the quarter and a slight acceleration since.

BILLIONS OF EUROS

Governments across the euro zone have injected billions of euros into wide-ranging projects in a bid to stimulate growth, while the European Central Bank cut interest rates to an historic low of 1.0 percent.

"The industrial sector will be pivotal to the rebound. After five consecutive quarterly contractions in production up to Q2 this year, a robust quarter-on-quarter increase is on the cards for Q3," said Ken Wattret at BNP Paribas in a note.

Economists also said some pick-up in private consumption should also help, aided by schemes in many euro zone countries to boost car sales.

But a strong reading for the euro zone will mask some divergences among countries in the bloc.

Data out before the euro zone's on Friday should confirm the Italian economy climbed out of recession in the third quarter, following the lead of Germany and France which are set for their second consecutive quarter of growth.

But Spain was forecast to see its economy slump again in the third quarter, but by 0.4 percent, rather than the sharp 1.1 percent fall seen the previous quarter. Data for Spain will be published on Thursday.

The ECB left interest rates at a low of 1.0 percent on Thursday and said that other extraordinary measures such as its huge liquidity operations aimed at stimulating bank lending will only be phased out in a gradual and timely manner.

Such measures could prove key to ensuring a recovery takes root. Economists do not forecast the euro zone economy will fall back into recession, though they say the pace of growth will likely be slow for some time to come.

The European Commission on Tuesday predicted the economy will contract by 4.0 percent this year and grow by 0.7 percent in 2010, and 1.5 percent in 2011. The ECB is due to update its own staff forecasts at the bank's December meeting.

(For full weekly euro zone forecasts see [ECI/EURO])

(Polling by Bangalore Polling Unit; Editing by Ron Askew)

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