June 1 (Bloomberg) -- Manufacturing in the dozen euro nations may have contracted for a second month in May, adding to evidence oil prices around $50 a barrel and unemployment near a five-year high are holding back growth, a survey of economists showed.

An index based on a survey of about 3,000 purchasing managers compiled by NTC Research Ltd. for Reuters Group Plc probably fell to 49 from 49.2 in April, according to the median of 30 estimates in a Bloomberg survey. Before that, the index last was below 50, which indicates a contraction, in August 2003.

Growth prospects for the euro region are deteriorating as higher energy prices drive up costs and companies including Electrolux AB, the world's largest maker of household appliances, cut jobs. French voters rejection of the European Union constitution may add to the pessimism. European consumer and business confidence declined in May, reports showed yesterday.

``Companies are suffering and urgently need to restructure,'' said Dario Perkins, an economist at ABN Amro Holding NV in London. ``This will undoubtedly lead to more pain for consumers who are already very worried about their jobs.''

The European Central Bank will probably cut its 2005 growth forecast to about 1.4 percent from 1.6 percent when policy makers meet on June 2 in Frankfurt, according to the median forecast of 21 economists surveyed by Bloomberg. The ECB will also keep its benchmark interest rate at 2 percent, a six-decade low, said all 40 economists who replied to a separate survey.

``The ECB can effectively argue that with these historically low levels there is not much more they can do,'' said Steve Major, head of government bond strategy at HSBC Holdings Plc in London.

`Increasing Uncertainty'

ECB President Jean-Claude Trichet said May 30 oil prices have led to ``increasing uncertainty over economic prospects.'' Bank of Italy Governor Antonio Fazio, who also sits on the ECB's 18-member governing council, said yesterday Europe's fourth-biggest economy is in an ``acute phase of difficulty'' after it slipped into recession for the second time in as many years.

The price of crude climbed 38 percent in the past year, touching a record of $57.65 a barrel in London on April 4. Germany's VCI chemical industry group, which includes companies such as Leverkusen, Germany-based Bayer AG, said May 24 oil prices may limit sales growth. Cologne-based Deutsche Lufthansa AG last month announced plans to raise fuel surcharges to cope with higher energy costs.

Faced with shrinking profit margins, more companies are resorting to job cuts. Electrolux plans to eliminate about 1,100 jobs in Europe, transferring production to countries with lower wages. International Business Machines Corp., the world's biggest computer-services company, said May 4 it will eliminate as many as 13,000 jobs, mainly in Europe.

Unemployment Concern

With a euro-region unemployment rate of 8.9 percent, consumers are keeping a rein on spending. Surteco AG, a supplier of plastic coatings for furniture, blamed ``an exceptionally weak domestic economy'' for a 14 percent drop in first-quarter earnings. ProSiebenSat.1 Media AG, Germany's largest broadcaster, said May 13 that consumers ``remain wary'' and expects the country's advertising market to decline about 2 percent this year.

``It's very worrying that business and consumer confidence are tanking at the same time,'' said Philip Shaw, chief U.K. economist at Investec Bank Ltd. in London.

European households were the most pessimistic in a year last month and business confidence dropped to a 21-month low, surveys by the European Commission showed yesterday. In France, consumer optimism this month plunged to the lowest since 2003 after unemployment in April held at its lowest since 1999, separate government reports showed yesterday. The German jobless rate stayed close to a post-World War II high in May.

Referendum Blow

Confidence in the euro economy was dealt a further blow after French voters rejected the EU constitution in a referendum on May 29. The euro is heading for the biggest monthly loss in four as opinion polls show Dutch voters are likely to do the same today.

The euro's 8 percent drop this year against the dollar may give a boost to exporters such as Italy's Ducati Motor Holding SpA by making their goods cheaper in regions that use the U.S. currency. The U.S. economy is the destination for about a fifth of euro-area exports.

The reluctance of households to spend makes it difficult for companies to pass on more expensive raw materials to consumers, forcing many to lower their sales goals instead. Berthold Hermle AG, a German maker of drilling machines, said on May 24 it would be struggle to reach its 2005 targets.

To contact the reporter on this story: Flavia Krause-Jackson in Rome at fjackson@bloomberg.net.

Last Updated: May 31, 2005 19:07 EDT