U.S. Treasury Secretary Timothy Geithner said on Tuesday that a global assault on recession was making headway, although data from Europe gave evidence only of a stuttering recovery at best.
Geithner assured an audience in Saudi Arabia, one of the United States' biggest creditors, that Washington bore a special responsibility to help spur a recovery in the world economy.
But data on Tuesday showed that German investors have turned more pessimistic than expected, a signal analysts say means the nation's economy won't start growing until next year at least.
"The German economy could be among the first to escape the recession. However, it is 'if' and not 'when'," said Carsten Brzeski, an economist at ING Financial Markets. "Cautious optimism, not enthusiasm, is most suitable for the way forward."
Euro zone industrial production was also a disappointment, growing only slightly in May after a bad April, and remaining 17 percent lower than it was a year earlier.
Officials and investors alike are on tenterhooks, waiting to see whether a tentative upturn in economic data in recent weeks means an eventual end to the worst downturn since the 1930s.
Many fear that it is merely a short-lived blip, sustained only by the trillions of dollars that governments around the world have poured into saving their banks and stimulating their economies — borrowed money that will take years to repay.
Singapore, a small economy but one that lies at a major crossroads of the world trading system, showed how volatile the figures can be. The Asian city state reported a remarkable 20.4 percent annualised rise in its GDP in the first quarter, after four quarters of recession.
NOTE OF OPTIMISM
In Jeddah, Geithner struck an optimistic note. "The force of the global recession is receding," he said. "For the first time in several quarters, the IMF and a range of private analysts are starting to revise up their forecasts for growth in the second half of this year and next."
As he did in London on Monday, Geithner accepted the global economy faced severe problems but was reassuring so long as "steady, forceful and sustained" support continues until private investment and spending lead a recovery.
Saudi Arabia has invested much of its foreign currency reserves in U.S. government debt and Geithner stressed that Washington would not shirk its duties.
"Given the dollar's role in the international financial system and the significant impact of the U.S. economy on global economic conditions, we fully recognize that the United States has a special responsibility to play," he said in prepared remarks for delivery to the Jeddah Chamber of Commerce.
As he spoke, data released in Europe showed at best a weak recovery. German analyst and investor sentiment fell in July for the first time since October 2008, a leading survey showed. The Mannheim-based ZEW economic think tank's monthly poll of economic sentiment fell to 39.5 from 44.8 in June.
ZEW economist Michael Schroeder said this was in line with zero growth in the German economy for the rest of this year.
But zero growth is better than a decline. "The stabilisation of the German economy is underway but it will not be as strong as latest data could make us believe," said ING's Brzeski.
Euro zone industrial output rose month-on-month in May for the first time since August 2008, the EU statistics office reported. Production gained 0.5 percent on the month but fell 17.0 percent year-on-year.
On the markets, a burst of confidence in U.S. financial stocks lifted global equities before results due from Wall Street bank Goldman Sachs. World stocks as measured by MSCI were up 1 percent by 1045 GMT and the emerging markets sector index jumped more than 2 percent.
"We are going into the earnings season so the optimists will look for signs of a confirmation of recovery," said Jonathan Lawlor, head of European research at Fox-Pitt, Kelton.
Wall Street rallied more than 2 percent on Monday after bullish comments on financial sector performance by analyst Meredith Whitney lifted hopes that banks' quarterly results may be stronger than expected.
