Germany sees recovery; U.S. data fail to cheer
LONDON/WASHINGTON (Reuters) - Germany said on Thursday it may have already emerged from recession, but an apparently promising drop in U.S. weekly unemployment claims was dismissed as a distortion caused by auto industry layoffs.
In addition, falling sales at many U.S. retailers in June and mixed May U.S. wholesale data pointed to prospects for a slow economic recovery, helping to pare early gains in U.S. stock prices.
Amid fresh signs that Germany had turned the corner, a senior German government official told Reuters that Europe's biggest economy may have emerged from recession in the second quarter, just as trade data showed exports making a tentative recovery.
"Gross domestic product could have been flat or may have even grown very slightly in the second quarter," the official said, speaking on condition of anonymity.
"This isn't an upswing yet, it's a normalization after the big economic slump," the official added. The Federal Statistics Office is due to give a preliminary estimate of second-quarter GDP on August 13.
The number of U.S. workers filing new claims for jobless benefits fell sharply last week, but the data were distorted by an unusual pattern of layoffs in the automotive industry, which amplified the decline.
June sales fell for most U.S. retailers as the plunging job market and cool, rainy weather dampened interest in summer shopping, sparking fresh concern about the back-to-school season.
In a positive development, U.S. wholesale inventories shrank in May for the ninth month in a row, falling to their lowest level since August 2007, government data showed. However, the drop was smaller than analysts had forecast.
Britain's central bank decided against expanding a scheme to pump more money into the economy, despite concerns the global recovery remains fragile.
Sterling jumped against the dollar and UK gilt futures dropped on the surprise decision by the Bank of England, which had been expected to add 25 billion pounds ($40 billion) to the 125 billion pound program.
Analysts said the bank wanted to see August inflation data before deciding its next move.
Trade figures lent some support to hopes that the eurozone anchor is emerging from the worst global recession since World War Two, recording a higher-than-expected surplus of 10.3 billion euros ($14.3 billion) in May.
"We can't talk about a change in trend. But the freefall appears to have stopped. There is a lot to suggest that foreign trade supported the economy again in the second quarter," said Thorsten Polleit of Barclays Capital.
Despite some encouraging data and corporate results, doubts remain over the strength of any recovery, and leaders of the Group of Eight industrial nations meeting in Italy agreed it was too early to cut off economic aid -- despite deep interest rate cuts and an estimated $5 trillion in public spending.
"All were of the view that the crisis is a long way from being over," said German Chancellor Angela Merkel. "With luck, we have reached the bottom," she told reporters in L'Aquila, where leaders of the United States, Japan, Germany, France, Britain, Italy, Canada and Russia held their annual summit.
EUROPEAN SHARES RISE
The International Monetary Fund raised its 2010 global growth outlook but warned that neither the economy nor the banking industry was strong enough to do without heavy public spending and cheap central bank funds.
"The recovery is coming, but it's likely to be a weak recovery," IMF chief economist Olivier Blanchard said after the Fund forecast the world economy will slowly pull out of a 1.4 percent slump this year and grow 2.5 percent in 2010, faster than the 1.9 percent growth it forecast in April.
European stocks snapped a sharp five-session losing streak, as forecast-beating results from U.S. bellwether Alcoa (AA.N) calmed fears over the upcoming earnings season. [ID:nL9557790]
But lingering concerns about the global economy drove Asian stocks lower, and gold bounced up as investors sought to protect portfolios against uncertainty.
"Markets are still vulnerable right now to some further risk aversion," said James Moore, analyst at TheBullionDesk. "What we've seen over the past week or two is a realization that perhaps, certainly for the U.S., the V-shaped recovery scenario is looking less likely."
In another bearish sign, oil prices gave up early gains to drop below $60 a barrel, pressured by high U.S. inventories and concern about the timing of any recovery.
G8 BREAKTHROUGH?
China offered fresh assurances that the world's third-biggest economy was regaining momentum, with a leading think-tank saying growth should come within the 8 percent target this year.
In contrast, economies in Europe and the United States are expected to keep losing jobs for months to come, driving unemployment rates to double digits.
While battling recession topped the G8 agenda on Wednesday, Thursday's focus shifted to talks on global warming and trade with major emerging nations, which have complained they are suffering from a crisis they did not create.
A breakthrough on trade appeared within reach. Diplomats say the G8 and major developing economies should agree to conclude the stalled Doha round of trade talks in 2010.
($1=.6224 Pound)
(Reporting by Reuters correspondents worldwide; Writing by Eric Walsh; Editing by John Wallace)
