European Economic Confidence Improves More Than Forecast

Economic confidence in the euro area improved more than economists forecast in June, adding to indications the 17-nation economy is starting to recover from the longest recession since the debut of the common currency.

An index of executive and consumer sentiment rose to 91.3 from 89.5 in May, the biggest jump since July 2010, the European Commission in Brussels said today. The June reading, the highest in 13 months, was above the 90.4 median projection by economists in a Bloomberg News survey.

European Central Bank President Mario Draghi said yesterday that policy makers will maintain a loose monetary stance for as long as needed. Financial markets tumbled in the past week amid concern stimulus will be withdrawn since U.S. Federal Reserve Chairman Ben S. Bernanke said last week that policy makers may start slowing their pace of bond buying.

Today’s report “supports hopes that euro-zone economic activity may have finally stopped contracting in the second quarter,” said Howard Archer, chief U.K. and European economist at IHS Global Insight in London. “If June’s improvement in confidence can be extended, businesses will at least pare back their job cutting and consumers will gradually lift their spending.”

The euro-area economy shrank 0.2 percent in the first quarter, a record sixth consecutive contraction. The recession is forecast to end this quarter, as the economy stagnates before returning to growth in the following three months, according to a separate Bloomberg survey of economists.

‘Very Distant’

The ECB’s monetary policy “will stay accommodative for the foreseeable future,” Draghi said yesterday in Paris. “We have an open mind about all other possible instruments that we may consider proper to adopt.” He said an exit is “very distant.”

Separate data today showed that German unemployment unexpectedly declined in June amid signs that a recovery in Europe’s biggest economy is on track even as the euro area struggles to emerge from its recession. The number of people out of work in Germany dropped seasonally adjusted 12,000 to 2.94 million, the Nuremberg-based Federal Labor Agency said today.

In the euro area, the jobless rate increased to a record 12.2 percent in April, the latest data available. Euro-area unemployment figures for May will be published on July 1.

Second Half

“The euro-area economy has shown signs that it should stabilize at some stage in the second half of the year, but an upturn does not seem imminent,” economists including Philip Shaw at Investec in London said in a note. “Of course, euro-zone markets have not been immune to global events.”

The Stoxx Europe 600 Index slid to a six-month low in the wake of Bernanke’s announcement on June 19 that the U.S. central bank may start reducing bond purchases that have fueled gains in markets globally. The euro declined more than 2 percent against the U.S. dollar before pulling off its lows today to trade at $1.3025 at 12:52 p.m. in Brussels, up 0.1 percent on the day.

A gauge of sentiment among European manufacturers increased to minus 11.2 from minus 13, today’s report showed. An indicator of services confidence fell to minus 9.5 from minus 9.2, while consumer confidence gained to minus 18.8 from minus 21.9.

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