Data fuels hopes of world economy recovery

Reuters | Fri, 29 May 2009 12:39
[miningmx.com] -- Improving vital signs across the world - from Japanese factory output and British house prices to German retail sales and Indian GDP - gave hope on Friday that the global economy was responding to months of intensive care.

Japanese factory output rose 5.2 percent in April, the biggest jump in more than half a century, and manufacturers forecast further gains, while South Korean industrial output expanded for a fourth straight month, data on Friday showed.

That chimed with overnight data from the United States that durable goods orders there, too, were on the up, posting the biggest gain in 16 months.

The Japanese rise far outstripped the 3.2 percent poll forecast, suggesting that not all of it was down to replenishment of run-down stocks, and that manufacturers were beginning to anticipate a recovery in demand.

German retail sales figures pointed tentatively, and unexpectedly, in the same direction, with a 0.5 percent month-on-month rise in April, while private consumption for the first quarter rose a similar amount, despite a 3.8 percent contraction in GDP.

German retail figures for March were also revised upwards, to a more modest fall of 0.4 percent from an initial 1 percent.

"Today's numbers give some hope that private consumption could cushion the downswing of the German economy," said economist Carsten Brzeski at ING Financial Markets.

UK CONSUMERS "STANDING FIRM"

In Britain, too, the consumer confidence index remained steady at -27 after three months of gains.

"This is still very low historically, but is at least standing firm in the face of continuing depressed markets," said Rachael Joy from index compiler GfK.

UK house prices also registered a surprise rise in May -- the second time in three months -- but economists were quick to note that even two swallows don't make a summer.

"Any recovery is likely to be gradual and protracted," said Colin Ellis, economist at Daiwa Securities.

Even so, sterling took heart, adding 0.7 percent against the dollar putting it on track for its biggest monthly gain on the greenback since 1985.

Indian GDP beat forecasts with growth of 5.8 percent year-on-year in the March quarter, with strength in services and construction outstripping a decline in manufacturing.

"I think the GDP upgrade cycle has just started. We are past the eye of the storm," said Rajeev Malik, economist at Macquarie Capital.

Not all Friday's economic data was encouraging. Loans to euro-zone businesses grew at the slowest pace on record in April, and euro-zone inflation dropped to zero in May, while growth in the money supply slowed.

Economists expect euro-zone inflation to turn negative mid-year, raising fears that deflation could derail economic recovery.

Even so, stock markets were lifted across the globe. MSCI's all-country world stock index was up 0.7 percent, closing in on a new high for the year, with the pan-European FTSEurofirst 300 up more than 1 percent and MSCI's index of Asia-Pacific stocks up 1.7 percent to its highest since October last year.

Commodities prices were also given a boost, with oil at a six-month high above $65 a barrel, and industrial metals such as copper ticking up and heading for a fifth straight monthly rise.