Europe and Asia showed flickers of economic recovery on Friday with better-than-expected industrial output figures from France and Italy, mirroring numbers from Germany this week and adding to strong data from South Korea and India.
Evidence began emerging earlier this year that the world's worst recession since World War Two might be bottoming out, but the latest data displays the first broadly spread, tangible pointers to an upturn.
Sentiment surveys have for months pointed to a more optimistic picture than economic statistics and company reports have backed up, and the numbers have provided a mixed picture of whether recovery was around the corner.
French industry output for May rose from the previous month instead of staying flat as had been expected while Italy's May output was flat month-on-month, rather than reverting to a negative trend as forecast.
"The extent of the move confirms the improvement in the global climate that is starting to be felt, but it's too early to talk of recovery with industrial production still down close to 17 percent over the year," said Aurel BGC economist Jean-Louis Mourier, referring to the French numbers.
May output data from Germany also provided hope that the worst is over. Finance Minister Peer Steinbrueck supported that view on Friday, a day after a government official said the recession may have ended in the second quarter.
"There are initial signs that the slump may have bottomed out, but I'm very cautious here," Steinbrueck told German television station ARD.
ASIA
Encouraging signals came from Asia also. The Bank of Korea reported that Asia's fourth-largest economy grew at its fastest pace for 5-1/2 years in the second quarter, although it is still expected to shrink overall this year. Industrial output in India jumped 2.7 percent in May from a year earlier, almost double the forecast rate.
Quarterly results from India's leading outsourcing firm Infosys also beat forecasts, further evidence that Asia's third-biggest economy is gaining momentum.
But data from Japan showed that the crisis is far from over.
Japanese wholesale prices fell at a record pace in June, showing that the world's No. 2 economy is still struggling with slack demand despite some recent tentative signs of improvement in its manufacturing sector.
Wholesale prices fell 6.6 percent from a year earlier, reinforcing fears that Japan was poised for a second damaging spell of deflation — broad-based and lasting price declines — this decade.
(For a graphic for Japan's wholesale and consumer prices, click: http://graphics.thomsonreuters.com/079/JP_WPI0709.jpg)
"Even though production is picking up, Japan is saddled with huge slack in the economy, and this could pose the threat of a deflationary spiral," said Takeshi Minami, chief economist at Norinchukin Research Institute.
G8 IMF
IMF chief Dominique Strauss-Kahn used this week's summit of Group of Eight industrial nations to renew warnings that even as the world economy was on track for a recovery next year it would be premature to abandon stimulus policies.
G8 leaders agreed to keep economic lifelines in place until the recovery was well under way.
Together with counterparts from major developing nations — Brazil, China, India, Mexico and South Africa — they also sought to dispel fears that individual efforts to protect their economies could make things worse globally.
Their joint statement on Thursday vowed to refrain from competitive currency devaluations designed to help exporters and resist trade protectionism.
