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Tony Dolphin, director of economics and asset allocation at Henderson, said: “Eurozone growth fell 0.2 per cent in the second quarter, and our model is forecasting a recession in the next two quarters. A number of countries’ statistics ministries commented that slowing exports and investment spending were the main causes of the weakness.”

Mr Dolphin added that eurozone inflation held at 4 per cent in July and there were signs it might be near its cyclical peak, "as resource utilisation has rolled over".

Turning to the UK economy, Mr Dolphin noted the Bank of England’s latest quarterly inflation report showed an inflation profile undershooting its 2 per cent target by the end of 2009, based on market rates. The report also showed a strong rebound in growth in the second and third quarters of 2009.

“The Bank’s inflation profile was somewhat inconsistent with its growth profile, which showed growth picking up sharply into the end of next year," Mr Dolphin said. "Overall, the report appeared to be dovish.”

He also highlighted the continued fall in Chinese inflation during July, while fixed investment growth picked up.

Easing inflation means the Chinese authorities can begin to implement policies to support growth. Global economic growth is likely to slow in 2008 and again in 2009, reflecting the lagged effects of higher interest rates, the credit squeeze and higher food and energy prices, he said.

"There is a risk that, as the slowdown becomes synchronised, it deepens into a global recession. However, if this risk is avoided, growth should be recovering by mid-2009.”