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Group of Eight leaders said the economic recovery from the steepest recession since World War II was too fragile for them to consider reversing efforts to pump money into the economy.

President Barack Obama pressed for the door to remain open to more stimulus measures as a renewed stock-market drop stirred concern that $2 trillion spent worldwide so far hasn’t jolted consumers and businesses back to life.

“The G-8 needed to sound a second wakeup call for the world economy,” British Prime Minister Gordon Brown told reporters yesterday in L’Aquila, Italy, after the opening sessions of the leaders’ annual gathering. “There are warning signals about the world economy that we cannot ignore.”

Divergences over what to do next and calls from developing nations to do more to counter the slump underscored the G-8’s limited room for maneuver. The biggest borrowing spree in 60 years has failed to halt rising unemployment and left investors doubting the strength of the recovery. The MSCI World Index of stocks slid for a fifth day. The 23-nation index has dropped 8 percent since a three-month rally ended on June 2.

“Economies still need as much stimulus as possible,” said David Page, an economist at Investec Securities in London. “It’s important not to react too soon to early signs of a pickup or take false comfort from them.”

IMF Forecasts

The International Monetary Fund echoed that skepticism, upgrading its 2010 growth forecast while saying the rebound will be “sluggish” and urging governments to stay the economic- stimulus course.

Emerging countries like China will lead the way, expanding 4.7 percent next year, the IMF said yesterday, up from an April prediction of 4 percent. The Washington-based lender forecast growth of 0.6 percent in the advanced economies, up from expectations of stagnation.

“It’s a very volatile situation,” European Commission President Jose Barroso said in a Bloomberg Television interview in L’Aquila. “We are not yet out of the crisis, but it seems now that the free fall is over.”

In the U.S., a jump in the jobless rate to a 26-year-high of 9.5 percent in June and a 6.9 percent drop in the Standard & Poor’s 500 Index in the past month raised questions whether Obama’s $787 billion stimulus package is turning the world’s largest economy around.

Democrats in Congress are split over whether to spend more, adding to a deficit that the IMF puts at 13.6 percent of gross domestic product in 2009, the highest since World War II.

‘Potentially Counterproductive’

Obama straddled the issue yesterday, telling ABC News that spending more borrowed money is “potentially counterproductive.”

A G-8 statement yesterday embraced options ranging from the second U.S. stimulus package some lawmakers and economists are advocating to Germany’s emphasis on shifting the focus to deficit reduction fast payday loans.

“Exit strategies will vary from country to country depending on domestic economic conditions and public finances,” leaders of the eight economies — the U.S., Japan, Germany, Britain, France, Italy, Canada and Russia — said in the statement.

“There is still uncertainty and risk in the system,” Mike Froman, deputy U.S. national security adviser, told reporters in L’Aquila. While exit strategies can be drawn up, it’s not “time to put them into place.”

Bank bailouts and recession-fighting measures will explode the debt of the advanced economies to at least 114 percent of gross domestic product in 2014, the IMF forecasts.

‘Exit Strategy’

German Chancellor Angela Merkel is the leading opponent of additional stimulus, pushing through a statement at last month’s European Union summit that called for “a reliable and credible exit strategy.”

Merkel, campaigning for re-election in September, has warned against billowing budget deficits, which will rise in the EU to an average of 6 percent of GDP in 2009 from 2.3 percent last year, the EU forecasts.

“We have to get back on course with a sustainable budget, but with the emphasis on when the crisis is over,” Merkel said.

The 16-nation euro economy has shown some signs of resilience since shrinking 2.5 percent in the first quarter, the most since the currency’s birth in 1999. While measures of business confidence, manufacturing and services have ticked up, job cuts by companies from Austrian Airlines AG to ThyssenKrupp AG pushed up unemployment to 9.5 percent in May, a 10-year high.

Asian Resilience

Further signs of a resilience also emerged in the Asia- Pacific region, where governments including China and Australia have boosted spending to increase economic growth. Australia’s jobless rate rose in June by less than forecast, climbing to 5.8 percent from 5.7 percent, a report showed today. Analysts tipped a 5.9 percent rate.

In China, new loans rose almost fivefold in June from a year earlier to 1.53 trillion yuan ($224 billion), the central bank said on its Web site yesterday. China’s passenger-vehicle sales rose 48 percent in June, the biggest jump since February 2006.

Canadian Prime Minister Stephen Harper occupied the middle ground, saying the first priority is to spend wisely what has already been committed.

“Before there’s talk of additional stimulus, I would urge all leaders to focus first on making sure that the stimulus that’s been announced actually gets delivered,” Harper said.

Russia, a G-8 member generally classified as an “emerging” economy, also believes that exit strategies “have to be developed already now,” said Andrei Bokarev, a Russian official.

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Europe’s manufacturing and service industries contracted at a slowest pace in nine months in June, adding to signs the recession is bottoming out.

A composite index of both industries for the 16 euro nations rose to 44.4, the highest since September, from 44 in May. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates a contraction. Economists forecast an increase to 44.9, according to the median of 12 estimates in a Bloomberg News survey.

The European economy is showing signs of stabilization after shrinking at the fastest pace in at least 15 years in the first quarter. German and French business confidence rose for a third month in June, reports showed this week. European Central Bank President Jean-Claude Trichet said this month the worst of the recession may be past after the ECB cut interest rates to a record low and pledged to buy covered bonds to fight the crisis.

Today’s report adds “to recent evidence that the worst may be behind and that the euro-zone economy is stabilizing,” said Carsten Brzeski, an economist at ING Groep NV in Brussels. “However, there is no reason for overhasty enthusiasm. A return to positive growth numbers might have to wait until 2010.”

Markit’s manufacturing index rose to 42.4 this month from 40.7 in May, according to today’s report. The services index fell to 44.5 from 44.8.

Financial Crisis

The worldwide financial crisis, which started with the collapse of the U.S. subprime-mortgage market in 2007, has led to more than $1.46 trillion of writedowns and credit losses at financial institutions, according to data compiled by Bloomberg, and sent the global economy into its first recession in more than six decades.

The euro-area economy may shrink about 4.6 percent this year and around 0.3 percent in 2010, the ECB forecasts. Trichet said on June 4 that the economy may contract “at much less negative rates” in the second half of the year. In the first quarter, gross domestic product dropped 2.5 percent.

ECB council member Ewald Nowotny said in a June 19 interview that the central bank won’t substantially alter its assessment of the economic outlook and is likely to keep interest rates steady for at least the rest of 2009. The ECB’s plan to purchase 60 billion euros ($83.2 billion) of covered bonds to spur lending will be carried out mainly by national central banks and maturities won’t exceed five years, Nowotny said in the interview in Vienna cash advance.

Global Slump

Companies across Europe have been forced to cut output and eliminate jobs to weather the global slump. Stuttgart, Germany- based Porsche SE, the maker of the 911 sports car, said on June 19 that nine-month revenue dropped 15 percent.

Europe’s economy lost a record 1.22 million jobs in the first quarter with payrolls declining 0.8 percent from the previous three months. The jobless rate, already at a decade- high 9.2 percent, may jump to 11.5 percent in 2010, the European Commission forecasts.

With increased unemployment offsetting the benefits of falling consumer prices, French household spending unexpectedly plunged 1.6 percent in May from a year earlier and was down 0.2 percent on the month, data today showed. Paris-based Air France- KLM Group may need to eliminate another 3,000 jobs, Chief Executive Officer Pierre-Henri Gourgeon said last week.

European stocks were lower. The Dow Jones Stoxx 600 Index was down 0.3 percent at 201.71 at 9:45 a.m. in London.

‘Eye of the Storm’

Deutsche Bank AG Chief Operating Officer Hermann-Josef Lamberti said on June 18 that the market is still in “the eye of the storm” as the credit crisis affects the real economy. “By no means is the worst over,” said Lamberti, who is also a member of the management board at Germany’s largest bank. “The financial crisis isn’t over.”

PSA Peugeot Citroen, Europe’s second-largest carmaker, said today that it may have an operating loss of as much as 2 billion euros this year, depending partly on the aid the French government is able to offer the auto industry. “A number of uncertainties remain,” the Paris-based company said.

European governments have boosted spending to bolster their economies, while the ECB this month kept its key rate at a record low of 1 percent. Gains in business and consumer confidence indicate that the measures may be starting to show results. Consumer confidence in Germany, the region’s largest economy, rose for a second month, data today showed.

“The euro-zone economic recovery is far from guaranteed and relapses remain a very serious danger,” said Howard Archer, chief European economist at IHS Global Insight in London. “It is imperative that the ECB does not rule out taking further efforts to boost economic activity.”

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Manufacturing in the New York region this month contracted at a faster pace as sales and inventories declined, showing the economy is still months away from a sustained recovery.

The Federal Reserve Bank of New York’s June general economic index fell to minus 9.4, less than forecast, from minus 4.6 the prior month, the bank said today. Readings below zero for the Empire State index signal manufacturing is shrinking.

U.S. companies are likely to keep cutting stockpiles until sales improve, indicating orders and production will be restrained. The New York Fed’s factory gauge of the outlook for the next six months climbed to the highest level in almost two years as the drawdown in goods on hand clears the way for factories to ramp up output in coming months.

“The road to recovery in manufacturing is going to be long and gradual,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “At some point manufacturers will cut inventories to below final demand and that will set the stage for a recovery in production.”

Stocks extended losses following the report and Treasury securities rose. The Standard & Poor’s 500 index was down 1.4 percent to 932.82 at 9:40 a.m. The yield on the 10-year Treasury note decreased to 3.72 percent from 3.79 percent late on June 12.

Less than Forecast

Economists projected the Empire State index would hold unchanged at minus 4.6, according to the median of 43 estimates in a Bloomberg News survey. Forecasts ranged from 5 to minus 8.1.

The International Monetary Fund today raised its outlook for the U.S. and called for steps to reduce concern about rising public debt and inflation. The lender forecasts the world’s largest economy will contract 2.5 percent this year before expanding 0.75 percent in 2010. In April, the IMF projected the economy would contract 2.8 percent this year.

International holdings of long-term U.S. financial assets, a haven for investors during the global financial crisis, rose at a slower pace in April as China, Japan and Russia trimmed their holdings of Treasuries, the government also reported today. Total net purchases of long-term equities, notes and bonds rose a net $11.2 billion, compared with buying of $55.4 billion in March.

Growing Optimism

Factory executives in the New York Fed’s district, which encompasses New York state, northern New Jersey and one county in Connecticut, turned more optimistic about the future. The gauge measuring the manufacturing outlook climbed to 47.8, the highest level since July 2007, from 43.8.

The New York Fed’s measure of new orders increased to minus 8 car insurance.2 from minus 9 and a gauge of shipments fell to minus 4.8 from 1.3. The index of inventories decreased to minus 25.3 from minus 21.6.

The index of prices paid increased to minus 5.8 from minus 11.4, and the gauge of prices received rose to minus 12.6 from minus 27.3. A measure of employment improved to minus 21.8 from minus 23.9.

The headline New York Fed survey number conveys the general impression of executives on whether activity is increasing or decreasing, and isn’t a composite of the other readings.

‘Disappointing’ Reading

Although the main reading was “disappointing from the perspective of the stabilization story, the details of the report were not as weak as the headline,” John Ryding, chief economist at RDQ Economics in New York, wrote in a note to clients.

Today’s report is one of the earliest measures of regional manufacturing this month. The Philadelphia Fed report, due June 18, may show manufacturing in that region contracted at a slower pace in June, according to the Bloomberg survey median.

Regional and national purchasing manager surveys have shown a declining rate of contraction in recent months, one sign the worst of the manufacturing slump may have passed. Still, General Motors Corp. and Chrysler LLC’s plant closings as part of their bankruptcy reorganizations portend the auto industry will weaken further before it gets better.

Economists surveyed by Bloomberg News June 1 to June 8 projected the U.S. economy would grow at an average 1.2 percent pace in the second half of the year after falling by 2 percent in the second quarter. They also estimated the jobless rate will climb to 10 percent by the end of the year.

Signs of Improvement

Some companies, particularly technology and industrial- materials firms, are seeing signs the outlook is improving.

Armonk, New York-based International Business Machines Corp. last month said it’s “ahead of pace” to meet its 2010 earnings forecast.

Alcoa Inc., the largest U.S. aluminum producer, said May 29 that distributors of the lightweight metal are showing renewed buying interest and will generate a “giant sucking sound” of demand when the global economy revives.

Distributors “know if the green shoots turn over to become demand, they will not be able to supply,” Alcoa Chief Executive Officer Klaus Kleinfeld said at a presentation in New York. “The distribution chain will generate this giant sucking sound of demand.”

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Stocks rallied Monday, sending the Dow Jones industrial average near the breakeven point for the year, as better-than-expected readings on manufacturing activity raised hopes that a global economic recovery is brewing.

The Dow Jones industrial average (INDU) surged 221 points, or 2.6%, to close at 8,721.44 points. The bluechip average is within 55 points of breaking even for the year.

The broader S&P 500 (SPX) rose 24 points, or 2.6%, to about 943 points - its highest level of the year. The Nasdaq composite (COMP) jumped 54 points, or 3%.

The rally was broad based, with industrial and technology stocks leading the pack. Boeing (BA, Fortune 500) rose 6.5% and United Technologies Corp. (UTC) gained 5.3%. Shares of energy producers Exxon Mobil (XOM, Fortune 500) and Chevron (CVX, Fortune 500) rose as oil topped $68 a barrel.

As stocks advanced, demand for safe-haven assets evaporated. The yield on the benchmark 10-year note rose to 3.7% as its price fell sharply.

Stocks opened higher as investors looked past an official declaration of bankruptcy by General Motors, which had been widely expected. The rally gained steam after an industry report showed U.S. manufacturing activity shrank at a slower pace last month.

"Today’s data were better than expected, both here and abroad," said Phil Orlando, chief equity market strategist at Federated Investors. The recession has "reached its nadir" and the improved economic outlook has helped "draw some cash off the sidelines," he said.

Wall Street rallied Friday, with the major indexes ending May in positive territory. That marked the third consecutive month that stocks have risen, though May’s gains were smaller than those posted in the previous two months.

Looking ahead, automakers report monthly sales figures Tuesday. And investors are already bracing for the government’s closely-watched jobs report due Friday.

Economy: The manufacturing sector contracted in May, but the pace of deterioration was slower than expected, according to an industry report.

The Institute for Supply Management said its index of national factory activity rose to 42.8 from 40.1 in April. Economists had expected the index to increase to 42, according to a survey by Briefing.com.

A reading below 50 in the index indicates the manufacturing sector is contracting. But May’s gain puts the index over the tipping point that suggests expansion in the overall economy. A reading above 41.2%, over a period of time, is generally consistent with growth in gross domestic product.

Meanwhile, two separate reports showed manufacturing activity in China expanded last month. A measure of India’s manufacturing sector rose to its highest level in eight months.

European manufacturing activity shrank at a slower pace in May, with a euro zone purchasing managers index marking its biggest monthly jump on record instant payday loan.

In the United States, construction spending unexpectedly rose 0.8% in April, its biggest increase in eight months, the Commerce Department reported. Analysts had forecast spending to fall 0.8%.

Separately, personal income rose 0.5% in April, the biggest increase in 11 months, the government reported Monday. But consumer spending dropped 0.1%.

Dow changes: Two Dow components, General Motors and Citigroup (C, Fortune 500), will be officially removed from the average June 8, Dow Jones announced Monday. Travelers Companies (TRV, Fortune 500) will take the place of Citi; Cisco Systems (CSCO, Fortune 500) will fill GM’s slot on the Dow.

"I think getting some of the dogs out of the Dow is helping [to] feed the psychology," said Nick Kalivas, vice president of financial research at MF Global. But Monday’s manufacturing reports were the main driver of the rally, he added.

Autos: GM (GM, Fortune 500) filed for bankruptcy protection Monday in a move aimed at helping the once-mighty automaker emerge with only its more profitable plants, brands, dealerships and contracts.

GM’s stock rose 18% earlier in the session. Analysts said the rally was related to short selling, a strategy that allows investors to sell stock they don’t yet own and then buy it later when the price falls. On Monday investors were buying back shares to cover their short positions, driving up the price. Shares closed 8% higher.

GM stock will begin trading on the "Pink Sheets" on Tuesday morning, said Cromwell Coulson, CEO of Pink OTC Markets Inc. Pink sheets allow for trading in certain stocks that are not listed on an exchange or the Nasdaq.

GM’s bankruptcy filing occurred just hours after a U.S. Bankruptcy Court judge in New York approved Chrysler’s sale of most of its assets to Italian carmaker Fiat.

Bonds: Treasury prices fell, with the yield on the benchmark 10-year note rising to 3.71% from 3.46% Friday. Bond prices and yields move in opposite directions.

Other markets: Asian stocks soared, with Japan’s Nikkei adding 1.6%. European markets rallied, with shares gaining between 2% and 4%.

In currency trading, the dollar fell against the euro and the British pound. It rose against the Japanese yen.

NYMEX oil for July delivery rose by $2.27 a barrel to settle at $68.58.

COMEX gold for August delivery fell 30 cents to close at $980 an ounce. 

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Your home value has sunk like a stone, and you’re so far underwater you’ll have to hold your breath for years. Can you at least get a break on your property taxes?

In some cases, yes. Many municipalities’ tax bills are due in May, and the tab for 2009 could be lower.

As a rule, city and county assessors reappraise property values annually or biannually, using recent sales of comparable homes in the neighborhood to set values. So in areas that have seen significant drops in home prices, appraisals - and thereby property taxes - could also drop.

"Assessors have been flooded with requests from homeowners to reassess their home values," said Los Angeles County Assessor Rick Auerbach.

California is a special case, however, thanks to Proposition 13, a 30-year-old amendment to the state constitution that limited property tax increases to 2% per year. That meant that as California markets churned out double-digit price increases year after year, assessed values soon fell way behind market values.

As a result, only people who purchased homes at or near the market peaks are likely to have their homes revalued down. Those bought before 2003 likely have their assessed value still lagging market values.

For example, if you bought a home in Santa Monica in 1998 for $300,000, the home may still be worth $1 million - even after losing 25% of its value during the past two years. Meanwhile, its assessed valuation has only crept up about 25% to $375,000. No soup for you. As a matter of fact, your assessment should rise 2%.

However, recent buyers in areas such as Merced and Los Angeles, where prices have fallen more than 50% from their peak, should get tax breaks. Someone may have purchased a Merced house two years ago for $200,000, but the property is now valued at $100,000. The assessment, and the taxes, will be cut to reflect that decline.

In Los Angeles, the savings could be substantial; the average owner of those properties Auerbach is now reassessing should save an average of about $1,300 a year.

Less likely to get cuts

In other states, even if tax assessors reduce appraised values to reflect market conditions it still does not automatically mean a property tax cut car insurance. Localities could still raise their tax rates, the percentage of the home’s value that is used along with the assessed valuation, to calculate the final bills.

"Taxes are based on property values times [the tax rate]. We could have declining values but make up for it by raising the rate," said Bill Donegan, the property appraiser for Orange County, Fla., which includes Orlando.

This year, though, the value drops are so steep that any rate rise will probably not offset the lowered assessments. Plus, governments usually can’t just raise rates indiscriminately.

"In most places there’s a statuary limit to rate increases," said Ken Wilkinson, the property appraiser for Lee County, Fla., where Cape Coral home values have plunged 44% from their peaks. "In Florida, they can’t be raised more than 10%."

That should lead to substantial savings. In Orange County, the average taxpayer paid about 8% less last year, or nearly $130. "They may see a bigger drop this year," said Donegan.

The savings will be more modest, or non-existent, in states with lesser price declines. Many localities will raise rates enough to offset lower assessments, according to Joseph Henchman, the Director of State Projects for the Tax Foundation, a group that studies tax policy.

"The actual [revenue] collections could still rise or stay about the same," he said.

Governments may also raise fees on water, sewage and other services to keep up with looming budget deficits. They could even create entire new taxing entities, known as tax district, to fund fire departments, law enforcement, even libraries.

The local governments must keep revenues up to pay for programs they initiated during more flush times.

"We often see a ratchet effect," said Henchman. "Spending goes up when collections are strong but stay up even when collections go down." 

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The Federal Reserve may step up asset purchases to prevent its balance sheet from contracting until policy makers are convinced an economic recovery has taken hold, Fed officials and analysts said.

Demand for some of the Fed’s emergency programs has waned as the grip of the credit crunch loosens, with loans to banks shrinking 38 percent since Jan. 1. The main tool to keep the central bank’s holdings from falling from the current $2.1 trillion would be more purchases of Treasuries, said analysts including former Fed Governor Laurence Meyer.

Until now, policy makers’ balance-sheet decisions have been driven by the emergency liquidity needs of banks, bond dealers, money markets and failing financial institutions. U.S. central bankers are now transitioning to a period where economic data and their implications for forecasts will play the key role.

“You wouldn’t want policy to reverse course dramatically or ramp up dramatically unless the outlook changed substantially,” John Weinberg, research director at the Federal Reserve Bank of Richmond, said in an interview. “It really hasn’t yet.”

Fed officials have said their Treasuries buying isn’t designed to target any specific yield levels. Last week’s release of minutes of the April 28-29 Open Market Committee meeting showed some members were open to bigger purchases to spur a more rapid recovery.

Bond Commitments

The Fed’s asset holdings have fluctuated around $1.8 trillion to $2.1 trillion this year. So far, the Fed has completed about $691 billion of the $1.75 trillion of purchases of Treasuries and housing debt it has committed to.

It’s difficult for Fed officials to predict how fast liquidity and loan programs will contract as markets normalize; adding to Treasuries buying would ensure growth in the balance sheet.

Funds extended to financial institutions, such as term credit to banks, discount-window loans, currency swaps with foreign central banks, and direct loans to bond dealers, fell to $701.8 billion May 20, down 38 percent from $1.13 trillion at the start of the year.

Fed credit and securities loans to backstop markets for commercial paper, asset-backed commercial paper, and U.S. Treasuries fell to $216.9 billion May 20, down 59 percent from $529.5 billion at the start of the year.

The central bank shifted to using its balance sheet as the main policy tool after cutting the benchmark interest rate to zero to 0.25 percent in December.

‘Next Stage’

“We have to go to the next stage of the monetary transmission mechanism, and we have to look at a lot of other interest rates,” said Glenn Rudebusch, associate director of research at the San Francisco Fed bad credit payday loans. “There are a lot of different avenues through which these balance-sheet policies can work.”

Fed Chairman Ben S. Bernanke, who once wrote about the need for aggressiveness and “Rooseveltian resolve” in dealing with financial crises, warned lawmakers this month that a “relapse” in financial strains could cause an incipient recovery to stall.

“The committee is looking at the trend in financial conditions and whether private borrowing rates are narrowing,” said Meyer, now vice chairman of Macroeconomic Advisers LLC in Washington. “The recent run-up in Treasury rates is blunting the effect of the narrowing spreads that is under way.”

Yield Premiums

The yield premium investors demand to own investment-grade corporate bonds has fallen to 4.16 percentage points from almost 6 percentage points in March, bolstered by economists’ expectations for an end to the recession this year.

Rising Treasury yields threaten to curtail the decline in corporate borrowing costs. Ten-year yields closed at 3.74 percent yesterday, up from 3 percent the day before the Fed announced its purchase program in March. The spread between two-year and 10-year yields reached a record 2.76 percentage points on concern surging U.S. debt sales will overwhelm the Fed’s efforts.

Fed officials, in their most recent forecasts, signaled that both of their legally mandated objectives — stable prices and maximum employment — are under threat. Policy makers forecast the unemployment rate will be above their long-run preference range of 4.8 percent to 5 percent through 2011.

Inflation Goal

Similarly, Fed governors and district-bank presidents anticipate that inflation will be slower than their median long-run objectives of 1.7 percent to 2 percent in 2009, and 14 members expect the rate to be below the range next year.

Plugging those forecasts into a model to determine the right policy stance, “the funds rate should be near its zero lower bound not just for the next six or nine months, but for several years,” Rudebusch wrote in a research note released May 26.

“Markets are going to increasingly demand that there be some real green shoots” of an economic recovery, said Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc. in New York. “They are going to have to step in at some point and put some more easing in.”

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China’s industrial production grew less than economists estimated in April as electricity output fell and exports tumbled. Retail sales climbed.

Output rose 7.3 percent from a year earlier, the statistics bureau said today, after gaining 8.3 percent in March. That was less than the 8.6 percent median estimate of 20 economists surveyed by Bloomberg News. Retail sales grew 14.8 percent from a year earlier.

The data adds to evidence that a 4 trillion yuan ($586 billion) stimulus plan is buoying domestic growth, while the global recession takes a toll on exports and related industries. Urban fixed-asset investment grew a more-than-expected 30.5 percent in the first four months of this year, while a slump in overseas shipments deepened in April, reports showed yesterday.

“The recovery is still quite fragile — exports are still very weak,” said Isaac Meng,” a senior economist at BNP Paribas SA in Beijing. “Domestic demand is resilient.”

Retail sales grew more than the economists’ median estimate of 14.5 percent, after climbing 14.7 percent in March.

The yuan traded at 6.8223 against the dollar as of 12:05 p.m. in Shanghai, from 6.8226 before the data was released. The Shanghai Composite Index of stocks rose 0.5 percent.

A decline in power output accelerated to 3.5 percent in April from 1.3 percent in March, the statistics bureau said. Growth slowed in the production of computers, mobile phones, iron, steel and 10 non-ferrous metals.

Cement, Automobiles

Output of automobiles, cement, air-conditioners and oil products grew more strongly.

Shanghai’s stock index has climbed 44 percent this year on optimism that the government can engineer an economic revival. New lending is already higher than the government’s targeted minimum of 5 trillion yuan for the year and money supply surged by a record last month, central bank data showed this week direct faxless payday loans.

China’s vehicle sales have topped those in the U.S. this year. General Motors Corp. said its Chinese sales jumped last month to a record as government subsidies spurred demand.

“Data released this week displayed a vivid picture of a tug of war between sluggish external demand and robust domestic demand,” said Lu Ting, an economist with Merrill Lynch & Co. in Hong Kong. Inventory reductions may have played a role in weaker output growth, Lu said.

Money-supply growth tends to precede output gains by two quarters, suggesting production will strengthen in coming months, said Jing Ulrich, Hong Kong-based chairwoman of China equities at JPMorgan Chase & Co.

‘Solid Recovery’

The People’s Bank of China cautioned last week that the foundations for a recovery were not “solid,” with small businesses still lacking credit.

Economists were overly optimistic about April’s production because of gains in an official manufacturing index, which doesn’t adequately reflect small businesses, said Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong.

“Unless the corporate sector picks up steam, the economy as a whole cannot be recovering on a sustainable basis,” Ma said.

China is battling a global recession that choked off export demand, dragging economic growth to 6.1 percent in the first quarter, the slowest pace in almost a decade. Overseas shipments declined 22.6 percent in April from a year earlier, the customs bureau said yesterday.

Today’s industrial-production number compares with a collapse in output growth to 3.8 percent in January and February combined and a 15.7 percent increase a year earlier.

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The state of Connecticut is analyzing the details of bonuses paid by American International Group to see whether they violated state law and what possible remedies might be pursued, the Commissioner of Consumer Protection said on Monday.

The list of remedies includes issuing a cease and desist order or restitution to the federal government, Commissioner Jerry Farrell, explained by telephone no fax payday loans.

Connecticut Attorney General Richard Blumenthal said there were $218 million of bonuses, a higher figure than the $165 million the Connecticut governor said the company reported.

This discrepancy now will be probed, Farrell said.

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Insituform Technologies Inc. improved sales in the fourth quarter, but its profit still fell, the Chesterfield-based company said Thursday evening in a release. The company repairs water, sewer and other underground piping systems.

Insituform reported its income was $9.65 million, or about 34 cents per share, for the quarter ended Dec. 31. That was down about 5 percent from $10.1 million during the same period a year ago, or about 37 cents per share.

The performance was hurt partly by about $1.3 million in costs from reducing the size of its North American and European segments.

The company’s revenues improved 6 percent to $137.3 million during the quarter from $130 million in the quarter a year ago no fax payday loans. The improvement came from the Insituform’s Asia-Pacific segment, which included the first sewer lining instillations done by the company in India.

The company projected an improved performance for 2009, with net income from continued operations of $25.5 million to $27 million, compared to the $24.1 million in had in 2008. Insituform expects a pair of recent acquisitions to create more opportunities to grow revenue.

cboyce@post-dispatch.com | 314-340-8345

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American International Group and U.S. authorities are in advanced discussions over a radical restructuring that would split the insurer into at least three government-controlled divisions in an attempt to keep it afloat, the Financial Times reported on its website, citing people close to the situation.

The insurer’s board is due to meet on Sunday and the company is on track to announce the overhaul as early as Monday, said the report, citing people close to the situation.

The restructuring, described by one insider as a “controlled break-up,” could lead to the end of AIG’s 90-year history as a stand-alone global insurance conglomerate.

It also could provide a template for carving up other troubled financial groups — such as Citigroup — should they be brought under government control, the people involved said, according to the report.

Under the plan, the government would swap its current 80 percent holding in the insurer for large stakes in three units — AIG’s Asian operations, its international life insurance business and the U.S. personal lines business. A fourth unit, made up of AIG’s other businesses and troubled assets, could also be formed, the FT reported payday loans for bad credit.

In return, the authorities would relax the terms, or even cancel a large portion, of a $60 billion, five-year loan to AIG and convert $40 billion worth of preferred stock into shares in an effort to ease the company’s burden, the Financial Times said.

If the plan goes ahead, AIG would remain as a holding company for now. But people involved in the talks say that that company could disappear if the government decides to recoup taxpayers’ investments in the insurer by selling or listing the three divisions separately.

The final shape of the new rescue attempt — the third government bailout of AIG in five months — could still change as talks among company executives, the U.S. Treasury, the Federal Reserve and credit-rating agencies continue, the FT said.

A spokesman for AIG was not immediately available for comment.

(Reporting by Euan Rocha; Editing by Gary Hill)

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