The eurozone is emerging from recession, the European Commission said yesterday, although it kept a gloomy overall forecast for 2009 while data showed job losses across the region still rising and sapping growth.

In its interim forecast, the European Union's executive said the eurozone economy would contract by 4.0 per cent this year - the same as it forecast in May - but would expand in both the third and fourth quarter.

Data released at the same time showed the pace of the decline in factories' output falling from previous months, though it was still 15.9 per cent year-on-year.

"The growth momentum... has therefore been revised up for the second half of this year. However, the outcome at the turn of the year proved so weak that, despite the new outlook and the better-than-expected outcome for the second quarter, the fall in GDP remains unchanged," the Commission said.

"The EU economy appears to be at a turning point," it said.

EU Monetary Affairs Commissioner Joaquin Almunia said the improved outlook resulted mainly from "unprecedented" amounts of money pumped into the economy by central banks and public authorities and expressed worries about further job losses.

"The impact of this crisis on the labour market has a lag of two to three quarters," he said.

Economists remained cautious about the numbers for that reason, and noted output was still falling month-on-month.

"The further decline in euro zone industrial output in July shows that while the wider economy has probably returned to positive growth in Q3, the recovery will not be particularly strong," said Ben May from Capital Economics.

"The 0.5 per cent fall in euro zone employment in Q2, after Q1's 0.7 per cent drop, confirms that the labour market remains in a fragile state.