Sept. 8 (Bloomberg) -- German exports gained in July and Italian business confidence unexpectedly rose in August, adding to signs that economic growth in the 12-nation euro region is accelerating from a second-quarter slowdown.

Exports in Germany, Europe's largest economy, increased 0.5 percent in July when adjusted for seasonal effects, the Federal Statistics Office in Wiesbaden said today. In Italy, Europe's fourth-largest economy, the Isae Institute's confidence index increased to 87.5, a seven-month high, from 86.4 in July.

An 8 percent drop in the euro against the dollar this year has supported growth by making exports more competitive, cushioning against record oil costs. Italian motorcycle maker Ducati Motor Holding SpA said July 26 it expects sales and profit to improve. About a quarter of the 40,000 motorcycles the company builds each year are sold in the U.S.

``Euro region growth should pick up a little in the third quarter,'' said Holger Schmieding, co-head of European economics at Bank of America in London. ``But we're afraid we'll see it slow again in the fourth quarter when petrol price rises really start to bite.''

The price of oil, which averaged $58.91 a barrel in July, surged to a record $70.85 on Aug. 30 after Hurricane Katrina closed down U.S. refineries. Oil futures traded at $64.95 a barrel in New York today, a 50 percent rise this year.

German Election

The German export data mark the third report this week pointing to growth in Europe's largest economy after second- quarter stagnation. German industrial production and manufacturing orders both jumped in July, according to reports issued by the Economy and Labor Ministry this week.

Germans are voting in a general election on Sept. 18. Polls show Chancellor Gerhard Schroeder will lose to Angela Merkel amid dissatisfaction with his economic policies.

The German economy has relied on exports to support growth, with unemployment at 11.6 percent, near a post-World War II record.

The BGA exporters' and wholesalers' group, which represents 135,000 German companies, today confirmed its export growth forecast of 6 percent for this year while cutting its prediction for economic expansion to 0.7 percent from just under 1 percent.

BGA President Anton Boerner said in Berlin today that ``high'' unemployment and ``weak'' private consumption prompted the revision. ``The high level of oil and energy prices is also having a braking effect,'' he said.

Rising energy costs prompted the ECB to trim its growth estimates on Sept. 1, as it kept its benchmark interest rate at a six-decade low of 2 percent for a 27th month. The euro region may expand 1.3 percent this year instead of 1.4 percent predicted in June, the central bank said.

Italian Recovery

Record oil prices have more than offset the effect of Italian Prime Minister Silvio Berlusconi's 6 billion euros in income-tax cuts this year. Pessimism among consumers contributed to retail sales declining for the 13th month in August, according to a report published Sept. 6 and compiled for Bloomberg LP by NTC Research Ltd. The drop in Italian retail sales compared with a sixth increase in Germany and a fourth in France.

The Italian economy emerged from recession in the second quarter, growing at the fastest pace in more than four years. The Organization for Economic Cooperation and Development this week revised its forecast for Italy's economy this year to 0.2 percent growth from a 0.6 percent contraction.

Economists had expected a decline in the confidence gauge to 85.5, according to the median estimate of 11 analysts surveyed by Bloomberg News.

`Encouraging Data'

Growth in the 12 nations sharing the euro may accelerate to 0.4 percent in the third quarter from 0.3 percent in the second quarter, ``and then move sideways as the pressure from high oil prices damps consumer spending,'' said Vincenzo Guzzo, European economist at Morgan Stanley in London.

The Paris-based OECD raised its 2005 growth forecast for the 12-nation euro region to 1.3 percent from 1.2 percent because of higher exports. It left its prediction for U.S. growth unchanged at 3.6 percent. The German economy may expand at 0.4 percent in the current quarter after stagnating in the previous three months, the OECD said.

``There is some encouraging data from Germany,'' OECD Chief Economist Jean-Philippe Cotis said in Paris on Sept. 6. ``The recovery has been export-led on the back of a reacceleration in world growth but there are some signs that fixed investment may be gathering strength.''

To contact the reporter on this story: Matthew Brockett in Frankfurt at mbrockett1@bloomberg.net.

Last Updated: September 8, 2005 07:28 EDT