Euro zone business confidence falls to the lowest in three years

"It is bad. Everything is down, we are heading towards another quarterly economic contraction," said Carsten Brzeski, economist at ING bank in Brussels.

The Eurozone economy stagnated in the first three months of the year and contracted 0.2% in the April-June period. Economists expect another contraction in the third quarter.

Two consecutive quarters of contraction is considered to mark recession.

"Consequently, it appears that the Eurozone has suffered further, appreciable GDP contraction in the third quarter. This would put the Eurozone officially into recession," said Howard Archer, economist at IHS Global Insight.

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 pessimism in the third quarter came from European Central Bank data on lending to households and companies. It showed credit to the economy fell more than expected in August.

Data released by the European Central Bank showed that loans to the private sector fell 0.6% from the same month a year ago. The flow of loans to non-financial firms fell by €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.

The European Commission sentiment survey showed Eurozone 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, the strongest Euro zone economy for a long time, was suffering too.

German unemployment rose for a sixth month running in September meaning that domestic demand might not be able to compensate for weakening exports within the Eurozone. Joblessness remains near to its lowest level since German reunification more than two decades ago.