Jan. 24 (Bloomberg) -- European business confidence probably stagnated in January as economic growth struggled to accelerate, surveys of economists showed.

An index of business confidence in Germany, Europe's largest economy, may have declined to 96 from an eight-month high of 96.2, according to the median forecast of 41 economists. Confidence was probably unchanged among French executives and rose in Italy, economists expect separate reports to show.

In Europe, ``there is no internal source of growth and the euro's appreciation is disrupting the external source of growth,'' said Francesco Giavazzi, a former Italian Treasury official, who teaches economics at the Massachusetts Institute of Technology.

More than a year of export-led growth hasn't been enough to spur domestic demand in the $10 trillion economy, as consumer spending is held back by unemployment near a five-year high. Falling oil prices and the euro's decline from a record have eased concern exports may wane before investment and spending pick up.

The European Central Bank last week said growth and inflation risks have ``diminished'' after oil prices fell and signaled it is in no hurry to raise borrowing costs from a six-decade low as price and wage increases remain contained. French household spending unexpectedly rose in December, a report last week showed.

The Munich-based Ifo economic institute will release its report on German business confidence at 10 a.m. on Jan. 26. Italy will follow the next day at 9:30 a.m. in Rome and France's Paris- based statistics office Insee will publish its index on Jan. 28.

Investment Picking Up

``Fears about the oil price have abated somewhat and the euro has weakened,'' said Ian Stewart, chief European economist at Merrill Lynch & Co. in London. Growth in 2005 will be like last year, he said, ``not an apocalypse, but also not a boom.''

Oil costs have dropped 14 percent to $44.66 per barrel of Brent crude at 12:20 p.m. in Frankfurt on Friday, from a record $51.95 on Oct. 27. The euro has declined about 5 percent from its record $1.3666 on Dec. 30, to $1.2987. It is still up 7 percent against the dollar in the past five months.

``We expect some improvement in domestic demand, but overall growth will remain short of potential'' in 2005, said Klaus Baader, an economist at Lehman Brothers Holdings Inc. in London. ``Capacity utilization in the industry has improved and that should give rise to some more investment spending.''

German Forecasts

The ECB in December forecast growth will probably accelerate to about 1.9 percent this year from 1.8 percent in 2004. German Economy and Labor Minister Wolfgang Clement will probably say he expects Europe's largest economy to grow between 1.6 percent or 1.7 percent this year when he publishes revised growth forecast on Jan. 26. The economy grew 1.7 percent in 2004.

Clement said earlier this month he expects growth this year that is ``not lower than last year's.'' Germany's six leading economic institutes have reduced their 2005 growth forecasts to between 0.8 percent and 1.8 percent on expectations domestic demand won't recover enough to offset a slowdown in export growth.

Companies including T-Mobile International AG, Deutsche Telekom's wireless unit, are still trimming jobs even after Germany's economy recorded the fastest growth in four years in 2004. T-Mobile plans to shed as many as 2,200 jobs in Europe by the end of next year. Infineon Technologies AG, Europe's second- largest semiconductor maker, may detail cost cuts as early as today when it reports earnings.

``Companies and investors are waiting for further improvement of the economy,'' said Manfred Kurz, an economist at Bayerische Landesbank in Munich.

France on Jan. 28 will probably say its unemployment rate held at 9.9 percent for a fifth month in December, according to the median forecast of 25 economists in a Bloomberg survey.

Growth in the U.K., which is not part of the 12-country euro region, probably held at a 0.5 percent quarterly rate in the final three months of 2005, according to the median of 40 economists. The U.K. is the first of the Group of Seven nations to report gross domestic product for the period on Jan. 26.

To contact the reporter on this story: Christian Baumgaertel in Frankfurt at cbaumgaertel@bloomberg.net.

Last Updated: January 23, 2005 19:06 EST