Laborers rest on the scaffolding of a building undergoing construction in the southern Indian city of Chennai Friday.

Japan’s industrial production jumped the most in 56 years in April and India’s economy expanded more than economists forecast in the first quarter, adding to evidence that the global recession is easing.

The US economy shrank at a 5.7 percent annual pace in the first quarter. The economic slowdown is forecast to ease this quarter, reflecting smaller declines in stockpiles and construction that will set the stage for a return to growth later this year.

The world economy is showing signs of recovery from its worst recession since the Great Depression after central banks and governments cut interest rates close to zero and pumped more than US$13 trillion into their economies. The

International Monetary Fund nevertheless expects the global economy to contract 1.3 percent this year and some strategists say it is too early to give the all-clear.

“The worst of it is probably coming to an end,” Stephen King, chief economist at HSBC Holdings Plc, told Bloomberg Television in an interview Friday. At the same time, “the level of activity around the world is still remarkably depressed. We’ll see three to four months of pretty good news. But then all bets are off.”

Stock markets

Investors are anticipating a global recovery. The MSCI World Index of 23 major stock markets rose 1 percent to 946.96 points Friday and is poised to extend its longest winning streak since the credit-market seizure began. The dollar weakened against the Australian and New Zealand currencies as investors sought higher yields. Crude oil rose to the highest in almost seven months.

Consumer sentiment in the UK matched the highest level in almost a year this month. Poland on Friday posted the only growth among the European Union’s 10 eastern members so far in the first quarter. Households in Japan are the least pessimistic they’ve been in 10 months.

“It’s safe to argue that we’ve turned the page after severe weakness in the first quarter,” said David Cohen, head of Asian economic forecasting at Action Economics in Singapore.

Made in America

Asia’s ability to lead the world economy out of recession will probably be hampered by its dependence of exports to a US economy still burdened by excessive debt, said Stephen Roach, chairman of Morgan Stanley Asia.

“The region’s fate remains made in America,” he said in an e-mailed note. “That is where hopes of an Asia-led rebound are most tenuous. After a dozen years of excess, the overextended American consumer is tapped out.”

Rising unemployment and credit conditions around the world also mean any global recovery is likely to be weak.

The US unemployment rate is already the highest in a quarter century. Japan’s jobless rate climbed to a five-year high in April, prompting households to pare spending for a record 14th month, separate reports Friday showed.

Even after April’s output gain, Japanese production is running at two-thirds of last year’s levels, saddling manufacturers such as Nikon Corp. with workers and factories they no longer need. That is calling into question the health of a stock market rally that has seen the Nikkei 225 Stock Average surge 35 percent since March 10, says Andrew Bell, head of research and strategy at Rensburg Sheppards Plc. in London.

Heart of dilemma

“The actual level is about where Japanese industrial production was in 1980,” said Bell. “That goes to the heart of the dilemma over the stock market. How far can you travel on things getting worse less rapidly or recovering a small amount of the ground lost?”

Federal Reserve Chairman Ben S. Bernanke is also struggling to bring down borrowing costs to revive the US housing market. Mortgage rates are almost back to where they were in March, before the 30-year rate fell to a record and sparked a refinancing boom.

For now, economies get a fillip in coming months as companies replace stockpiles ran down during the depths of the recession.

China’s prospects have also improved, analysts say. The world’s third-largest economy will expand 7.5 percent this year, according to the median estimate of 14 economists surveyed by Bloomberg News, up from a 7.1 percent forecast in February.

“What we’re seeing is a good old-fashioned kind of inventory rebuild associated with the fact that supply collapsed further than demand over the last 12 months and we are now seeing a recovery in that supply,” said King.

Source: Bloomberg