Europe's economy failed to grow in the second quarter as consumers, fearing job cuts, curtailed spending and exporters such as BASF AG struggled with the euro's gain against the dollar, a survey of economists showed.
The US$8 trillion economy of the dozen nations sharing the euro stagnated in the second quarter, after a 0.1 percent expansion in the first, according to a survey of 18 economists by Bloomberg News. The report will be released by the EU's statistics office on Thursday.
To help foster a recovery, the European Central Bank cut rates to a half-century low in June. Reduced borrowing costs, faster expansion the US and planned tax cuts may revive growth in the second half. Companies including ABN Amro Holding NV reported rising profit for the second quarter after cutting jobs.
"The process of cost cutting is behind us and companies are well prepared for the economic recovery," said Christoph Leitl, president of Eurochambres, the Brussels-based lobby group that represents more than 15 million companies in Europe.
Italy, the third-largest economy in the euro area, fell into recession in the second quarter.
The economies of Germany and the Netherlands also contracted in the period, surveys of economists showed. The two countries report GDP figures on Thursday, providing the basis for Eurostat's estimate.
The European Commission will also publish forecasts for the third and fourth quarters on Thursday. The commission's last forecast, dated July 10, was for growth of between zero and 0.4 percent in both the second and third quarters.
The economy will expand 0.2 percent this quarter and 0.4 percent in the three months to December, according to a survey of economists by Bloomberg News.
There is "increasing reason" to expect a recovery in the second half, the European Central Bank (ECB) said in its monthly report published last Thursday.
The ECB has reduced rates three times in the past eight months to 2.5 percent as it seeks to shore up the economy.
Europe's services industry last month expanded for the first time this year and business confidence in Germany, the region's largest economy, rose for a third month.
So far, companies on the Dow Jones Stoxx 50 Index have reported combined earnings of 23 billion euros (US$26 billion) for the second quarter, 88 percent higher than a year before. Among the companies saying profit fell, BASF, the world's largest chemical maker, blamed the dollar's drop.
The ECB said a pickup in foreign demand may help lessen the effect of the stronger currency on the euro region's economy.
"The timing of the euro's rise was bad because there wasn't any other growth in the economy," said Trevor Williams, an economist at Lloyds TSB Bank Plc in London.
The Netherlands, which fell into recession in the first quarter, will chart another three months of contraction, economists said. The German economy shrank 0.1 percent in the three months to June, according to the median forecast of 24 economists surveyed by Bloomberg News.
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