Euro-area recession seen over as champagne kept on ice

The euro-area economy probably edged back to growth last quarter for the first time since 2011, ending the longest recession since the single currency union started 14 years ago.

Gross domestic product in the 17-nation region expanded 0.2% in the three months through June after shrinking for the previous six quarters, according to the median of 41 forecasts in a Bloomberg News survey. The European Union’s statistics office in Luxembourg will release the data on Aug. 14. Germany probably grew about 0.75%, according to a government estimate, exceeding the 0.6% economists predict.

A year of relative calm on financial markets, budget cuts from Spain to Italy and accelerating growth in the U.S., the world’s biggest economy, have helped the euro area start to recover. While the overall outlook has improved, the recession has left the region with a youth unemployment rate of 24%, and parts of southern Europe remain mired in a slump.

“The external environment is really getting better, led by signs that U.S. demand is picking up,” said Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam. “The second quarter should mark the end of the recession in the euro area, but the recovery will be excruciatingly slow. We’re not getting the champagne out yet.”

Slowing Contractions

The euro slipped 0.4% to $1.3288 as of 2:03 p.m. London time. The Stoxx Europe 600 Index declined 0.1% after advancing 0.6% last week to a 10-week high.

European Central Bank President Mario Draghi has described progress as “tentative.” Against that backdrop, the ECB has cut interest rates to their lowest-ever level and Draghi has pledged they’ll stay there or lower for an “extended period.”

Spain’s economy shrank just 0.1% in the second quarter from the prior three months. Still, the country’s youth unemployment is 56%. In Italy, where Prime Minister Enrico Letta is easing last year’s budget austerity, GDP fell a less-than-forecast 0.2%.

Economic confidence in the euro area increased for a third month in July. Manufacturing expanded for the first time in two years, according to a purchasing-managers survey by London-based Markit Economics.

Adecco SA, the world’s largest provider of temporary workers, reported increased profit for the second-quarter, and the Glattbrugg, Switzerland-based company said it sees more positive signs for business as Europe’s labor markets stabilize.

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