Gross domestic product in the 17-nation currency region will stay unchanged in the three months through March, before rising 0.1 percent and 0.2 percent in the second and third quarters, the median forecast in a Bloomberg News monthly survey showed. GDP probably fell 0.4 percent last year and will decline 0.1 percent in 2013, economists said.
The survey follows a downbeat assessment by European Central Bank President Mario Draghi last week when he said that while the euro-area crisis has eased, “we are not at all seeing an early and strong recovery.” The 17-nation region’s economy last grew in the third quarter of 2011 and remains under pressure from government budget cuts and weak confidence. Goldman Sachs Group Inc. says authorities need to resolve the debt turmoil “fully” to encourage growth.
“Without a decisive resolution it will be hard to fully restore private-sector confidence and credit availability, and stimulate growth,” Goldman analysts including George Cole in London said in a report. “As a result, 2013 promises to be another year of weakness for Europe’s economy.”
In addition to austerity measures, the euro economy’s performance may be further threatened by the strength of the common currency. It has climbed against 30 of its 31 most-traded peers since Draghi said in July that he would do “whatever it takes” to save the currency.
The euro rose to as high as 83.39 pence versus the pound today, the strongest level in nine months. Against the dollar, Europe’s shared currency reached $1.3404 on Jan. 14, the highest since Feb. 29, 2012. It was 0.6 percent stronger at $1.3363 as of 11:06 a.m. London time.
Italy, the region’s third-largest economy, will shrink 0.3 percent this quarter and 0.1 percent in the three months through June, a separate survey showed. That’s a gloomier prediction than last month, when economists forecast a 0.2 percent GDP drop this quarter and a flat performance in the next.
Parliamentary elections scheduled for Feb. 24-25 have provided a staging ground for former premier Silvio Berlusconi to blame incumbent Mario Monti for the nation’s recession. Berlusconi, fighting criminal charges that he paid a minor for sex, is gaining support, according to an EMG poll this week.
Italian industrial production fell 1 percent in November from October, according to data on Jan. 14. Output fell an annual 7.6 percent on a workday-adjusted basis. Data today showed euro-area construction fell 0.4 percent in November from October. It dropped 4.7 percent from a year earlier.
Economists’ expectations for growth in Germany remain the same as a month ago, with the Bloomberg survey predicting a first-quarter expansion of 0.1 percent. For the full year, growth of 0.7 percent is forecast.
Chancellor Angela Merkel’s government cut its 2013 projection yesterday to 0.4 percent from 1 percent previously. The downgrade followed a Federal Statistics Office report showing economic growth slowed last year to less than a quarter of its 3 percent pace in 2011.
“We assume that the phase of weakness this winter will be overcome in the course of the year and that our economy gains traction again,” Economy Minister Philipp Roesler told reporters in Berlin.
France is expected to contract 0.1 percent this quarter, a forecast unchanged from last month, after shrinking an estimated 0.3 percent last quarter, according to the Bloomberg survey. That means the euro area’s second-largest economy will slip into recession for the first time since 2009 as President Francois Hollande strives to reduce the nation’s deficit in the face of soaring jobless claims.
Renault SA (RNO), the carmaker whose European sales dropped the most in 2012, said this week it will cut 17 percent of its French workforce in the next four years, eliminating 7,500 jobs to face shrinking demand for cars in the region. PSA Peugeot Citroen, Ford Motor Co. (F) and General Motors Co. (GM) are also reducing workforces and closing plants in response to plunging demand amid recessions in the euro region.
For Spain, economists in the survey see a 0.4 percent contraction this quarter. The country, which has resisted requesting a full bailout after being granted international aid for its banks last year, probably will see GDP decline 1.5 percent in 2013, according to the survey.
The mixed picture across the euro area has kept the ECB’s policy on hold since September when it announced a program which would allow for the purchase of government bonds in some circumstances. The bank’s governing council kept its benchmark interest rate on hold at 0.75 percent when it met Jan. 10. That rate isn’t likely to change this year, according to the survey.
“The ECB won’t take action on rates in 2013,” said Michel Martinez, an economist at Societe Generale in Paris. “It’s problem is that financial markets remain fragmented, with companies in Italy and Spain still facing completely different conditions for financing than those in Germany and France.”
In Asia today, Sri Lanka’s central bank left its benchmark borrowing cost unchanged to damp price gains and bolster economic growth, while signaling it may ease monetary policy in coming months. Governor Ajith Nivard Cabraal said in an interview with Bloomberg Television that “the time has now come to ease” rather than tighten policy as inflation is “pretty much under control.”
Elsewhere, Australia’s unemployment rate rose as the nation posted its worst back-to-back years of job growth since the 1997 Asian financial crisis.
Payrolls advanced 148,300 last year after a 49,800 gain in 2011 for a two-year increase that was the weakest since 1996-1997, government data compiled by Bloomberg show. Unemployment rose to 5.4 percent last month as the number of workers fell by 5,500 and may keep climbing after the economy slowed in the second half of 2012.
In the U.S., the number of building permits issued in December probably rose 0.5 percent to a 905,000 annual rate, economists predicted before government data today. Permits are a proxy for future construction. A separate report may show fewer Americans filed applications for unemployment benefits last week.