European Commission forecasts sharper-than-expected slowdown
Economic growth is expected to be 1.4% this year in the European Union (1.3% in the euro area) - around half a percentage point less than forecast in April.
Inflation is expected to average 3.8% in the EU and 3.6% in the euro area this year following the continued strong rise in commodity prices.
This represents an upward revision on previous European Commission forecasts, although inflation could be at a turning point as the impact of past increases in energy and food prices gradually fades in the coming months.
The figures produced today are based on revised projections for the seven countries which together make up about 80% of the EU's GDP.
It is calculated on the basis of updated projections for France, Germany, Italy, the Netherlands, Poland, Spain and the United Kingdom. A full forecast covering all countries individually (including Ireland) is due on November 3.
Joaquín Almunia, Economic and monetary affairs commissioner said today: "The continuation of the turmoil in the financial markets one year on, the near doubling of energy prices over the same period and the correction in some housing markets have had an impact on the economy, though the recent fall in oil and other commodity prices and the easing up in the euro exchange rate have provided some relief.
"In this difficult and uncertain environment we must learn from past mistakes and keep a steady course of action.
"Moving ahead with Europe's reform agenda is crucial to continue creating jobs and to cope better with external shocks.
"We must speed up the implementation of the road map to help restore confidence in the financial markets, and preserve the improvements in public finances so as not to increase the burden for future generations, which will already face the challenge of an ageing population."
Output has started to fall in several advanced economies in the second quarter of this year, caused also in some countries by a downturn in the housing sectors.
GDP contracted by 0.1% in the EU and by 0.2% in the euro area.
In addition, the continued rise in commodity prices, the ongoing financial turmoil and, in some cases, a housing shock, caused confidence to deteriorate, capital costs to increase further and consumer-price inflation to surge, putting a brake on domestic demand.
