Jan. 8 (Bloomberg) -- Economic confidence in the euro area increased more than economists forecast in December even as the 17-nation currency bloc remained mired in its second recession in four years.
An index of executive and consumer sentiment rose for a second month to 87 from 85.7 in November, the European Commission in Brussels said today. Economists had forecast an increase to 86.3, according to the median of 24 estimates in a Bloomberg News survey. The unemployment rate in the euro region rose to a record 11.8 percent in November, the European Union’s statistics office said in a separate report.
The improvement in sentiment is in line with strengthening business confidence in Germany, Europe’s largest economy. Still, German factory orders fell more than economists expected in November amid weak demand from outside the euro area.
“We expect the uncertainty emanating from the sovereign debt crisis, which has been hanging like dark clouds over the euro-zone economy, will continue to ease,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt. “From the spring, the economy in the core countries should start to grow again.”
The euro pared gains after the data were released and traded at $1.3119 at 12:25 p.m. in Brussels, little changed on the day.
The euro-area economy shrank 0.1 percent in the third quarter after a 0.2 contraction in the three previous months. Gross domestic product probably fell another 0.3 percent from October through December, according to the median estimate of 22 economists in a Bloomberg survey. The EU is due to publish GDP data for the fourth quarter on Feb. 14.
A gauge of sentiment among European manufacturers improved to minus 14.4 from minus 15 in November, today’s report showed. An indicator of services confidence rose to minus 9.8 from minus 11.9, while consumer sentiment climbed to minus 26.5.
Today’s data “point to a turnaround” with regards to the sovereign debt crisis in the euro area, said Thilo Heidrich, an economist at Deutsche Postbank AG in Bonn. “We expect a slow recovery this year.”
Still, euro-area unemployment continues to climb as the fiscal crisis and tougher austerity measures deepen Europe’s economic troubles. Today’s jobless report showed that 18.8 million people were unemployed in November, up 113,000 from the previous month. At 26.6 percent, Spain had the highest jobless rate in the currency bloc. Germany’s jobless rate was 5.4 percent and France’s stood at 10.5 percent. Austria had the lowest rate at 4.5 percent.
‘Far From Over’
The economic environment will be more difficult this year than in 2012, German Chancellor Angela Merkel said on Dec. 31. Europe’s debt crisis is “far from over,” though progress has been made and the “reforms that we’ve agreed on are starting to take effect,” she said.
The European Central Bank lowered its growth forecast for the euro area on Dec. 6 and now predicts a contraction of 0.3 percent in 2013.
Global growth may pick up this year as U.S. manufacturing expanded in December, reflecting an increase in orders, employment and exports.
Growth in China is forecast to accelerate this year as the new Communist leadership is determined to guard against slower economic growth. This has helped spur a 78 percent rebound in the price of iron ore that led Perth-based Fortescue Metals Group Ltd. to resume work at a project suspended four months ago and may help boost tax revenue in Australia.
In the U.S., state and local governments are in their best financial shape since the recession, giving them leeway to cushion the country’s economy from federal budget cuts with spending and hiring of their own.
Yet growth abroad didn’t translate into November business for companies in Germany. Factory orders, adjusted for seasonal swings and inflation, dropped 1.8 percent in the month, the Economy Ministry in Berlin said today.
German exports plunged 3.4 percent in November, the steepest decline in more than a year, according to the Federal Statistics Office in Wiesbaden.
Schaeffler AG, the roller-bearing maker that is the biggest investor in car-parts manufacturer Continental AG, last month lowered its 2012 sales forecast because of weaker demand in Europe and Asia.
Economic weakness at the end of last year was “temporary” and measures taken to resolve the debt crisis are showing a “positive effect,” Germany’s Economy Minister Philipp Roesler said yesterday. The country’s economy grew 0.75 percent in 2012, he added.
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