By: inter01 9 November 2008 view: 10

* WHAT: Euro zone GDP growth flash estimate for Q3

* WHEN: Friday Nov. 14 at 1000 GMT

* GDP seen down 0.2 percent, euro zone in recession

By Nigel Davies

LONDON, Nov 7 (Reuters) - The euro zone is already at the start of its first ever recession, first official estimates for third quarter GDP are likely to reveal this week, and the real question now is how long and deep it will be.

A slew of miserable data in recent weeks suggest the recession may be much more prolonged than thought after a new wave of the credit crisis unfurled, backing up economists' calls for even lower European Central Bank interest rates.

A Reuters poll of 38 economists showed euro zone gross domestic product fell by 0.2 percent for the second successive quarter between July and September -- meeting the technical definition of recession of two quarters of contraction.

German data for the third quarter, due on Thursday, could well set the tone for the euro zone numbers. They are expected to show the largest economy in the euro area contracted by 0.2 percent.

Forecasts for GDP in the 15-nation bloc range from a 0.2 percent expansion to a contraction of 0.3 percent, with only four economists predicting the economy would hold steady or grow.

"We see three quarters of negative growth -- starting in Q2 and ending in Q4, but there are clearly downside risks of an extended recession," said Guillaume Menuet at Merrill Lynch, who forecasts contraction in the third quarter of 0.1 percent, with worse to come in the fourth quarter.

But he said that after the first quarter of next year the economy would see some rebound in growth after aggressive monetary policy measures are taken across the whole of Europe.

The preliminary data will not include a breakdown of growth in the euro zone but falling global demand and poor consumer sentiment likely pulled growth down.

The data will support the view that the ECB has more work to do after chopping 50 basis points off official borrowing costs on Thursday to take them to a two-year low of 3.25 percent.

Economists are convinced the bank will cut rates by another 50 basis points in December and ease them to 2.0 percent by the end of the second quarter. [ID:nL6443937]

ECB President Jean-Claude Trichet said after the ECB cut rates that he did not exclude a further reduction at the bank's December meeting when the it releases its updated staff projections for growth and inflation.

He also said that turmoil on financial markets had generated an extraordinarily high degree of uncertainty about the economic outlook.

Cooling inflation has enabled the bank to embark on a rate cutting cycle the economy is crying out for.

The poll also showed final data on Friday should confirm that inflation hit 3.2 percent in October. While that is still some way above the ECB's ceiling of 2.0 percent it is expected to slip further in coming months. But benefits for consumers could take a long time to show up.

"While the decline in energy and food prices is positive for household real income growth in the near term, labour market conditions will deteriorate markedly in coming quarters, weighing on sentiment and spending," said BNP Paribas in a note.

(Polling by Bangalore Polling Unit; Editing by Patrick Graham)