Aug. 25 (Bloomberg) -- Business confidence in Germany and Belgium probably rose in August, adding to evidence the economy of the dozen nations sharing the euro may resume growth in the second half, surveys of economists showed. The Ifo institute's index of western German sentiment may have gained for a fourth month, climbing to 90 from 89.2 in July, according to the median forecast of 26 economists surveyed by Bloomberg News. Belgian confidence probably advanced for the third month in four, economists said. The reports will be released on Tuesday and Monday, respectively.
The euro region's $8 trillion economy may be recovering after the stronger euro pushed it to the brink of recession in the first half. Consumer and executive confidence is rising in Germany, Europe's largest economy, as stocks rebounded and companies including Deutsche Bank AG reported improved results. ``We are seeing signs from consumers and businesses that the worst is behind us,'' said Reinhard Kudiss, an economist at Germany's BDI industry federation, a lobby with 107,000 members including Siemens AG and DaimlerChrysler AG. Germany's benchmark DAX Index has risen 63 percent from a seven-year low in March, more than double the increase in the Dow Jones Europe Stoxx 50 Index. Of the 28 companies in the DAX that have announced second-quarter earnings, 17 reported results that exceeded analysts' forecasts. Investors also will study reports on U.K. consumer confidence, French unemployment and inflation in the dozen states using the euro this week for clues on the timing of an economic recovery and the future direction of interest rates.
German Tax Cuts
German executives and shoppers are becoming more optimistic about a pickup in the country's $2.2 trillion economy after the government unveiled plans to speed up tax cuts and the European Central Bank in June cut rates to the lowest level for the country since 1876, when Otto von Bismarck was chancellor. Ifo's report is scheduled for release tomorrow at 10 a.m. in Munich. Ifo surveys about 7,000 executives each month for its index, which is a composite of companies' evaluations of current conditions and their expectations for activity in six months. The Belgian central bank's confidence index probably climbed to minus 13.5 in August from minus 16 in July, according to the median forecast of nine economists surveyed by Bloomberg. The report is seen as a leading indicator for the European Union because the region buys about three-quarters of its exports. It will be released today at 3 p.m. in Brussels.
U.K. Confidence
Dutch consumers and producers were less pessimistic in August than in July, a report today showed. The index measuring confidence among producers rose to minus 7.0 percent from minus 7.4 percent in July, the government statistics bureau said on its website. The consumer confidence index, adjusted for seasonal swings, rose to minus 34 from minus 40 in July. In the U.K., consumers probably became more optimistic for a fifth straight month in August amid the lowest borrowing costs in 48 years, economists said before a report due on Thursday. Europe's second-largest economy grew 0.3 percent in the second quarter, avoiding the contraction of the euro area thanks to buoyant spending by consumers. The euro region's economy probably contracted in the second quarter for only the second time since the currency was introduced in 1999, an official at the European Union statistics office said last week after France's gross domestic product unexpectedly shrank 0.3 percent in that period.
Boost From Euro
Economists will scour this week's reports for signs that rising confidence is translating into more business. While German executives have become more optimistic about future prospects in every month since May, their assessment of current activity has slipped in four of the past five months. ``The mood doesn't of itself make the economy,'' said Kudiss. ``Recovery expectations are still based on hope.'' BASF AG, the world's biggest chemical maker, said this month it was ``not very optimistic'' about the third quarter, and Bayerische Motoren Werke AG, the second-largest maker of luxury cars, said 2003 earnings would be little changed from last year. Europe may get a boost in coming months if the euro weakens through the second half, making it easier for companies to benefit from a U.S. recovery. Industrial production in the world's largest economy rose at the fastest pace in six months. ``The euro could have a positive effect on exports in the second half,'' said Bernd Weidensteiner, an economist at DZ Bank AG in Frankfurt. The currency, which has gained by an eighth against the dollar in the past year, slipped 8 percent since rising to a record in May.
No Rate Cut
Europe's economy may have to rely on exports even more if unemployment across the region weighs on consumer spending. France's jobless rate probably rose to 9.6 percent in July from 9.5 percent in the previous month, after shoppers cut spending and pushed the economy into an unexpected recession during the second quarter, the median forecast of 18 economists showed. The ECB still has scope to lower interest rates across the euro region if a recovery fails to materialize. The European Commission will probably report on Friday that inflation in the region accelerated to 2 percent in August from 1.9 percent the previous month, the median forecast of 15 economists showed. That's in line with the central bank's forecast for inflation to stay around its 2 percent ceiling in the second half of the year before slowing to below that level in 2004.
Futures trading suggests investors don't expect the ECB to lower borrowing costs further, after three reductions in the past nine months. The yield on the three-month interest futures contract for December settlement was at 2.17 percent at 12:52 p.m. in Frankfurt, compared with 2 percent a month ago. The money market rate was 2.15 percent. The ECB's benchmark lending rate currently stands at 2 percent, the lowest for any of the 12 nations using the euro in more than half a century. Policy makers next meet to set rates on Sept. 4. ECB President Wim Duisenberg is skipping the meeting to attend a gathering of former central bankers in Canada.//www.bloomberg.com