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The Walt Disney Co’s breakthrough deal to build one of its signature theme parks in Shanghai marks a major advance for Western media and entertainment firms trying to crack a tough China market.

Wednesday’s government approval for the theme park caps years of on-off talks between Disney and Chinese authorities, who are wary of too much foreign influence in the highly sensitive sectors of media and popular culture.

The new park planned for the Pudong new district of China’s financial capital will take years to contribute to a company that rakes in more than $30 billion in annual revenue.

But analysts see the move as an important step forward for Disney and other Western media firms to make inroads into the vast and untapped Chinese media and entertainment market.

“They’ve been laying the groundwork for a park for many years by exposing the population to Disney properties, film, TV and merchandising,” said Christopher Marangi, senior analyst with Gabelli and Co in New York.

“Adding a physical presence in the form of a park would really complete and add to the value chain in China.”

The breakthrough comes just two weeks ahead of a scheduled trip to China by U.S. President Barack Obama, a visit analysts had expected to help spur a decision on the park.

The deal has been seen by some as a feel-good bilateral story, highlighting U.S. cultural influence and an investment that does not entail U.S. manufacturing job losses, while China gets a boost to its leisure sector and to domestic demand as it tries to trim its dependence on exports.

For Shanghai, China’s financial hub, Disneyland could keep tourists coming after the curtain falls on the 2010 World Expo.

And Disney will hope the park, with an estimated price tag of $3.6 billion, will fare better than its Hong Kong property, which has struggled with lower-than-expected attendance and financial losses since it opened in 2005.

SMALL STEP FORWARD

Disney, Time Warner and News Corp have surprisingly little to show for their years of effort and extensive investments in China.

“I wouldn’t say this is a one-off gain,” said Vivek Couto, executive director of Media Partners Asia, on the deal’s broader significance for foreign media’s drive for a foothold in China.

“But it’s in a non-sensitive space. It’s a theme park. It’s got nothing to do with television content that can be politically sensitive or competitive with other major Chinese companies in the space.”

Even privately held domestic media can find the going tough, as leading Internet portal Sina found recently when it scrapped a merger with Focus Media due to government stonewalling over a deal that would have created a major new domestic media player. 

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The U.S. government’s auto trade- in program probably lifted retail sales in August to their biggest gain in more than three years and boosted factory output, economists said before reports this week.

Total purchases climbed 1.9 percent, the most since January 2006, according to the median of 60 estimates in a Bloomberg News survey ahead of Commerce Department figures due Sept. 15. The Obama administration’s “cash for clunkers” plan also helped industrial production in August to its first back- to-back monthly increase since 2007, economists said.

Americans flocked to auto showrooms last month to take advantage of the incentive program while purchases of other items were subdued even as evidence mounts that the worst recession since the Great Depression is ending. With unemployment forecast to reach 10 percent by the end of the year, consumer spending likely won’t lead the recovery.

“When you get to the fourth quarter, the blip from cash- for-clunkers falls out,” said Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts. “The production recession is over and the housing recession is over. When you combine those two, they add up to a fair amount of traction in the overall economy.”

Excluding automobiles, retail sales probably rose 0.4 percent, economists said.

The recession “has brought on a new focus on frugality,” Mike Duke, chief executive officer for Wal-Mart Stores Inc., said last week at a conference in New York. “Clearly customers are watching every penny.” The world’s largest retailer is offering discounts to attract shoppers, Duke said.

Beige Book

In the Federal Reserve’s Beige Book business survey, published two weeks before officials meet to set monetary policy, the central bank reported “flat” retail sales in July and August and cited some auto-industry contacts as saying the cash-for-clunkers effect may be temporary. Factories, meanwhile, showed “modest improvements” in most regions, the Fed said.

The auto plan, which ended Aug. 24, offered buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. The program produced almost 700,000 purchases, the Transportation Department said.

Cars and light trucks sold at a 14.1 million annual pace last month, up 25 percent from July, according to industry figures instant credit report. It was the biggest gain since October 2001.

Industrial Production

Last month General Motors Co. called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it ramped up second-half production in part to meet demand linked to the government trade-in program.

The Fed’s measure of production, due Sept. 16, probably rose 0.6 percent, the most since October, according to the survey. The report may also show the proportion of plant capacity in use in the U.S. climbed to 69.1 percent, the highest in five months.

Manufacturing in the New York region posted its first back-to-back monthly expansion since January 2008, economists said before a report due Sept. 15. The New York Fed’s general economic index likely climbed to 15 this month from 12.1 in August, according to the survey.

The housing market also is showing early signs of a rebound. A Commerce Department report due Sept. 17 will show builders broke ground on 600,000 new homes last month at an annual rate, a 3.3 percent gain and the fastest pace since November, according to the survey median.

The Standard & Poor’s homebuilder supercomposite index has gained 35 percent since the beginning of the year, compared with 15 percent for the broader S&P 500 index.

‘Ups and Downs’

With the jobless rate at a 26-year high and 6.9 million job losses since the recession began in December 2007, policy makers are trying to temper expectations for a robust economic turnaround. Treasury Secretary Timothy Geithner last week said the government is moving to withdraw some of its support for financial markets, while cautioning that the recovery will have “more than the usual ups and downs.”

The economy will expand at a 2.9 percent annual rate in the July-through-September period, according to the median of 61 estimates in a monthly Bloomberg News survey. Growth is projected to slow to a 2.2 percent pace during the last three months of the year.

The world’s largest economy contracted 1 percent in the second quarter, the Commerce Department said last month, the fourth straight quarterly drop. That made the downturn the longest contraction since such records began in 1947.

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Companies eliminated more jobs than forecast in August, a private survey indicated today, signaling that employers have yet to gain confidence about a recovery from the deepest recession since the 1930s.

The 298,000 drop followed a revised 360,000 decline the prior month that was smaller than previously estimated, according to figures from ADP Employer Services.

Today’s figures underscore the danger that consumer spending, which accounts for 70 percent of the economy, may be slow to gain traction in coming months. The report comes two days before a Labor Department release forecast to show the U.S. unemployment rate rose to 9.5 percent in August.

“Considering the severity of the recession and uncertainty over the strength and sustainability of the recovery, the labor market’s recuperation will be slow and painful,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, which forecast a drop of 290,000.

Stock-index futures dropped and Treasuries erased losses after the ADP report. Contracts on the Standard & Poor’s 500 Index lost 0.4 percent to 992.90 at 8:49 a.m. in New York. Yields on benchmark 10-year notes were little changed at 3.36 percent.

Labor Productivity

Meanwhile, U.S. worker productivity rose in the second quarter at the fastest pace in almost six years as companies squeezed more out of remaining staff to boost profits. Productivity, a measure of employee output per hour, rose at a 6.6 percent annual rate, the most since the third quarter of 2003, revised figures from the Labor Department showed today in Washington. Labor costs fell by the most in nine years.

The Labor Department’s payrolls report, due in two days, may show employers cut another 225,000 jobs in August and unemployment climbed from 9.4 percent in July, according to the median forecast in a Bloomberg News survey.

The economy already has lost 6.7 million jobs since the recession began in December 2007, the most of any economic slump since the Great Depression.

The ADP report was forecast to show a decline of 250,000 jobs, according to the median estimate of 32 economists in a Bloomberg survey. Projections ranged from decreases of 396,000 to 160,000.

Challenger Report

ADP includes only private employment and does not take into account hiring by government agencies. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP.

Employers announced 14 percent fewer job cuts in August than the year-earlier month, and 21 percent fewer on a month- to-month basis, according to a report today by Chicago-based placement firm Challenger, Gray & Christmas Inc.

Today’s ADP report showed a decrease of 152,000 workers in goods-producing industries including manufacturers and construction companies. Service providers cut 146,000 workers.

Employment in construction fell by 73,000, while financial firms trimmed jobs by 19,000, ADP said, the 21st consecutive monthly drop for the industry.

Companies employing more than 499 workers shrank their workforce by 60,000 jobs. Medium-sized businesses, with 50 to 499 employees, cut 116,000 jobs and small companies decreased payrolls by 122,000, ADP said.

Announcements of staff reductions continued last week. Whirlpool Corp., the world’s largest appliance maker, said Aug. 28 that it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs, or 1.6 percent of the company’s workforce.

Meanwhile, General Motors Co. last month called back 1,350 union workers, its biggest one-time increase in jobs since 2006, as it boosted second-half production in part because of the government’s “cash for clunkers” trade-in program.

The clunkers program, which ended Aug. 24, offered auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles.

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The worst U.S. recession in five decades probably eased in the second quarter as trade and government stimulus mitigated the damage from declines in housing, inventories and consumer and business spending, economists said before a report this week.

The world’s largest economy shrank at a 1.5 percent pace following a 5.5 percent drop in the first three months of 2009, according to the median forecast of 66 economists surveyed by Bloomberg News ahead of Commerce Department figures due July 31. Other reports may show orders for long-lasting goods fell and sales of new houses rose.

Leaner stockpiles set the stage for a return to growth this quarter as manufacturing and homebuilding stabilize, while efforts to revive demand globally boost exports. Consumer spending, which accounts for 70 percent of the economy, may be slower to recover as unemployment is projected to keep rising and home values are likely to fall further.

“The recession has decelerated sharply and is starting to form a bottom,’ said Joel Naroff, chief economist at Naroff Economic Advisors Inc. in Holland, Pennsylvania. “I think we’ll see some growth in the third quarter.” Naroff was the top forecaster in 2008, according to a survey by Bloomberg Markets magazine.

A drop last quarter would be the fourth consecutive decrease in GDP, the longest losing streak since quarterly records began in 1947. The decline so far has been the deepest since 1957-58.

GDP Revisions

The Commerce report will also include GDP revisions that may affect figures going back to when the government started keeping annual records in 1929.

Stocks rallied last week and bond prices fell on signs the economy was bottoming. The Dow Jones Industrial Average broke above 9,000 for the first time since January, gaining 4 percent over the five days to end the week at 9,093.24. Ten-year Treasury notes posted a second weekly loss, yielding 3.66 percent late on July 24.

Orders for durable goods last month fell 0.6 percent, economists project another report from Commerce on July 29 will show. Bookings rose in the prior two months. Excluding demand for transportation equipment, which is often volatile, orders were forecast to be little changed.

Machinery exporters are among those seeing signs of improvement. Caterpillar Inc., the biggest maker of earthmoving equipment, posted second-quarter profit that exceeded analysts’ highest estimate and raised its full-year forecast, saying stimulus programs are starting to support global demand cheap payday loans.

Stimulus Working

“We are seeing signs of stabilization that we hope will set the foundation for an eventual recovery,” Chief Executive Officer Jim Owens said in a statement July 21. “Credit markets have improved significantly. Fiscal policy and monetary stimulus have been introduced around the world, and we are seeing signs, particularly in China, that they are beginning to work.”

The economy will grow at an average 1.5 percent rate in the last six months of the year, according to economists surveyed by Bloomberg in the first week of July. Unemployment, which reached a quarter-century high of 9.5 percent in June, will top 10 percent by the first three months of 2010, the survey showed.

The projections are in line with estimates by Federal Reserve policy makers.

“The pace of decline appears to have slowed significantly, and final demand and production have shown tentative signs of stabilization,” Fed Chairman Ben S. Bernanke told Congress last week. “The labor market, however, has continued to weaken.”

Housing, Manufacturing

Both manufacturing and housing are showing signs of forming a bottom. Existing home sales have risen for three months, while the Institute for Supply Management’s gauge of factory activity has shown a lessening pace of contraction since January.

New-homes sales probably rose 2.9 percent in June, to a 352,000 annual rate, economists surveyed projected a Commerce report on July 27 will show. Purchases reached a record low in January.

Home prices continue to fall, albeit at a slower pace. The S&P/Case Shiller index of 20 major metropolitan areas, due July 28, will probably show property values fell 17.9 percent in May from a year earlier, according to the median forecast. The measure was down 18.1 percent in the 12 months ended April.

Dropping real-estate prices and rising joblessness have tattered household finances. A survey from the New York-based Conference Board on July 28 may show consumer confidence fell in July for a second month, the survey showed.

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Home resales in the U.S. probably rose in June and a gauge of the economic outlook improved, signaling the recession may soon be over, economists said before reports this week.

Purchases of previously owned homes climbed to an annual rate of 4.83 million, the highest level since October, according to the median of 57 estimates in a Bloomberg survey before the National Association of Realtors’ report on July 23. Figures tomorrow may show the index of leading indicators climbed for a third consecutive month.

Mounting evidence that housing is stabilizing is bolstering forecasts that government stimulus efforts will gain traction in coming months and lift the economy from the worst slump in five decades. Other reports may show rising joblessness is weighing on Americans’ moods, tempering optimism about any rebound.

“The end of the recession could be pretty close,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “We’re getting near the bottom in housing. It’ll still be a very gradual recovery for the economy, with a labor market that’s very weak.”

Reports last week corroborated that the housing slump, now in its fourth year, is dissipating. Housing starts unexpectedly jumped in June to the highest level since November as construction of single-family dwellings climbed by the most since 2004. Building permits, indicating future construction, rose the most in a year.

Signs of Stability

The National Association of Home Builders/Wells Fargo index of builder confidence increased this month to the highest level since September.

One reason for the projected increase in home resales is that prospective buyers are taking advantage of the plunge in prices caused by the foreclosure crisis. Filings reached a record in the first half of 2009, according to RealtyTrac Inc., an Irvine, California-based seller of default data. More than 1 no fax payday loans.5 million properties got a default or auction notice or were seized by banks in the six months through June.

The New York-based Conference Board’s leading index, which points to the direction of the economy over the next three to six months, rose 0.5 percent last month after a 1.2 percent increase in May, according to the survey median.

The jump in building permits was probably one of the biggest contributors to the predicted gain in the leading index, economists said. Fewer jobless claims and higher stock prices were also likely drivers.

Stocks Rise

Stocks have gained on optimism an economic recovery is at hand. The Standard & Poor’s 500 Index is up 39 percent since reaching a 12-year low on March 9.

A July 24 report may show the Reuters/University of Michigan final index of consumer sentiment fell in July after four consecutive gains, economists predicted. A preliminary reading dropped to the lowest level since March.

The U.S. has lost about 6.5 million jobs since the recession began in December 2007. Economists in a separate survey taken by Bloomberg this month predicted the jobless rate will reach 10 percent by year-end from 9.5 percent in June.

Federal Reserve officials thought the economy was “still quite weak and vulnerable to further adverse shocks,” according to minutes of their June meeting released last week. Even so, the report also said “the economic contraction was slowing and that the decline in activity could cease before long.”

Companies seeing an improvement include CSX Corp., the third-largest U.S. railroad. Jacksonville, Florida-based CSX reported second-quarter profit that topped analysts’ forecasts, and said demand for hauling most freight is stabilizing. Railroad traffic is considered an economic bellwether.

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Japan’s unemployment rate rose to a five-year high in May, while household spending unexpectedly advanced as the government distributed cash to help lift the economy out of its worst postwar recession.

The jobless rate rose to 5.2 percent from 5 percent in April, the statistics bureau said today in Tokyo, matching the median estimate of economists surveyed. Household spending rose 0.3 percent, the first gain in 15 months, a separate report showed. Economists expected outlays to fall 1.5 percent.

The world’s second-largest economy will probably expand for the first time in more than a year this quarter, boosted by Prime Minister Taro Aso’s stimulus measures. NEC Electronics Corp.’s President Junshi Yamaguchi said the “worst is over” and the Nikkei 225 Stock Average rose as much as 2.2 percent today, extending its gains since March 31 to 23 percent.

“We’re seeing the effects of the policy stimulus. Even though the unemployment rate is rising, production is recovering and so is consumer sentiment,” said Takuji Aida, senior Japan economist at UBS AG in Tokyo. Still, “the stimulus package will only have a large effect in the April-June quarter.”

The yen traded at 95.96 per dollar at 11:15 a.m. in Tokyo from 96.19 before the report was published. The Nikkei rose 1.9 percent to 9,968.04.

NEC’s Yamaguchi said in an interview yesterday that semiconductor orders for next quarter will jump “several percent” thanks to increased demand.

Cash Handouts

The government has given cash handouts of at least 12,000 yen ($125) to each resident, as well as tax breaks for fuel- efficient cars and incentives for buying eco-friendly televisions, refrigerators and air conditioners. The measures have helped lift consumer confidence to a 14-month high. Sales of electronics are up 18 percent since the government introduced incentives to buy energy-efficient goods, according to Tokyo- based researcher Gfk Marketing Service Japan Ltd.

The increased spending hasn’t been enough to revive business at all retailers. Takashimaya Co., Japan’s third- largest department-store chain, began its summer sales 10 days earlier than usual in a bid to spur demand. The Osaka-based company is reducing part-time workers, Hirofumi Hisasue, a senior operating officer, said after the company reported a third straight quarterly profit decline last week.

“The pressure to cut jobs is strong,” Jun Saito, chief economist at the Cabinet Office, said last week fast cash. Weak global demand means exports may not be strong enough to make up for the deteriorating job market at home, he said in an interview.

25-Year High

In the U.S., the unemployment rate rose to a 25-year high of 9.4 percent in May and is likely to climb to 10 percent by the end of the year, according to economists. The euro zone’s jobless rate reached 9.4 percent in May, the highest in a decade, economists predict a report will show this week.

Another key gauge of Japan’s labor market showed job prospects are the worst ever. The ratio of positions available to each applicant dropped to 0.44, the lowest since the survey began in 1963, the Labor Ministry said. Data yesterday showed retail sales dropped 2.8 percent in May from a year earlier, the ninth monthly decline.

“The job-to-applicant ratio was really eye catching — the data was horrible,” said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo. “The jump in household consumption is only a frontloading of spending.”

A separate report today showed that wages tumbled 2.9 percent, extending the longest losing streak in five years. Summer bonuses at Japan’s largest companies will slide a record 18.3 percent this year, according to a survey published last week by Keidanren, the country’s biggest business lobby.

Salary Cut

Panasonic Corp., the world’s largest maker of plasma televisions, last week said it will cut the annual salaries of its 10,000 managers this year.

“The economy remains at a very low level even though the worst is over,” said Yasukazu Shimizu, senior market economist at Mizuho Securities Co. in Tokyo. “Companies are still seeking ways to cut costs.”

The Organization for Economic Cooperation and Development last week forecast Japan’s jobless rate will rise to an unprecedented 5.8 percent in 2010.

“The jobless rate will approach 6 percent,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management. “Given the deterioration in profits, more companies will feel that they have excess labor.”

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Banks should revert to using equity to cushion against losses rather than the so-called hybrid debt they increasingly adopted before the credit crisis, the Bank of England said in its Financial Stability Report today.

The U.K.’s biggest lenders sold hybrid securities including subordinated notes as a cheaper way of meeting regulators’ capital requirements than issuing shares. Because the securities rank senior to equity in the event of a default, they’re less effective at buffeting against losses, and their value fell in the past two years as investors shunned hard-to-value assets.

“Subordinated debt should not feature as part of banks’ contingent capital plans,” the Bank of England said in the report. “Capital needs to be permanently available to absorb losses” and “the only instrument reliably offering these characteristics is common equity,” it said.

Regulators globally are considering ways banks can strengthen their ability to weather a future economic crisis, after financial institutions lost or wrote down almost $1.5 trillion since 2007, according to data compiled by Bloomberg. One of the proposals of authorities around the world is a return to using equity as capital, rather than forms of subordinated, or junior, debt.

U.K. banks need “higher-quality buffers consisting of common equity,” and the amount of capital a lender holds should reflect the impact its “distress or failure could have on the system as a whole,” according to the Bank of England report payday loan.

Britain’s central bank also said it supports the idea of lenders being required to set more capital aside when the economy is growing.

Buybacks and Exchanges

U.K. banks including Barclays Plc and Royal Bank of Scotland Group Plc have already started reorganizing their capital along the lines the Bank of England is suggesting, buying back or exchanging their subordinated debt to boost the levels of core Tier 1 capital, consisting mainly of equity and cash reserves. They do this by buying the notes back at a discount, booking a gain.

Barclays invited holders of its undated subordinated 7.7 percent bonds to swap the notes for new, more-senior securities on June 22, while RBS repurchased $12 million of notes due 2014 the next day, Bloomberg data show. Holders of Lloyds Banking Group’s subordinated bonds in pounds and euros agreed to swap about 66 percent of the securities for new senior debt in April.

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Reports on manufacturing and housing this week will probably offer evidence that the recession- stricken U.S. economy is within months of hitting bottom, economists said.

A 1 percent drop in industrial production in May, based on the median of 68 estimates in a Bloomberg News survey, was due mainly to auto-industry shutdowns that swamped gains elsewhere, analysts said. Other reports may show builders began work on more houses as sales steadied and consumer prices rose.

The fallout from bankruptcies at Chrysler LLC and General Motors Corp. is likely to reverberate through the industry and the economy in coming months, even as other areas stabilize. Plunging home prices, near-record low mortgage rates and tax credits for first-time buyers may help bring an end to the worst residential construction slump in seven decades.

“With Chrysler closing and GM downsizing, it’s going to be pretty ugly,” said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania. Still, “we’re in the process of hitting the trough of the recession, which we’ll probably see within the next few months.”

A decrease in the Federal Reserve’s production figures, due June 16, would be the 16th in the last 17 months. The report is also projected to show the proportion of plant capacity in use probably dropped to 68.4 percent, the lowest since records began in 1967, according to the survey median.

Plant Shutdowns

Chrysler shut all its plants on May 1 to clear as many unsold vehicles as possible from dealer lots while it restructures. The sale of most of Chrysler’s assets to a group led by Italian automaker Fiat SpA was completed last week.

GM, the biggest U.S. automaker, said June 1 it is stopping work at 14 plants as it restructures under Chapter 11.

General Electric Co. is among companies starting to see some improvement in economic conditions. Chief Executive Officer Jeffrey Immelt said at a conference last week that government efforts to thaw credit are starting to pay off, making it easier for companies to borrow.

“Capital markets have largely healed,” Immelt said. “As a company you have to invest now. You have to invest when things are darkest.” Immelt predicted the economic recovery will be slower than that following the 1982 recession, the last slump that approached the severity of the current downturn cash loans for bad credit.

One positive aspect of the excess in capacity is that it will help control inflation should raw-material costs keep rising, economists say. Consumer prices probably rose 0.3 percent in May as gasoline prices climbed, according to the survey median before a Labor Department report on June 17.

Less Inflation

Core consumer prices, which exclude food and energy, rose 0.1 percent in May after a 0.3 percent gain the prior month, according to the survey.

“The slack in resource utilization remains sizable, and, notwithstanding recent increases in the prices of oil and other commodities, cost pressures generally remain subdued,” Fed Chairman Ben S. Bernanke told Congress on June 3. “We anticipate that inflation will remain low.”

Concern over the amount of money the Fed has pumped into financial markets and the size of upcoming government security auctions to pay for stimulus efforts has caused interest rates on Treasuries to shoot higher in recent weeks.

The yield on the benchmark 10-year note reached 3.95 percent at the close on June 10, after being as low as 2.54 percent on March 18, the day the Fed announced it would buy Treasury securities in a bid to push borrowing costs down.

Housing Steadies

The housing recession that triggered the credit crisis and global slump is showing signs of bottoming as sales and construction have stabilized near historically low levels.

A Commerce Department report on June 16 may show housing starts last month rose 5.9 percent to a 485,000 annual pace from the prior month’s five-decade low, while permits rose to 509,000 from the prior month’s record low of 498,000.

Builders are still hurting after having to mark down prices in an effort to spur demand. Toll Brothers Inc. and Hovnanian Enterprises Inc. last week both reported their second-quarter losses exceeded analysts’ estimates.

“There is no question we’ve come down a pretty steep hill,” Michael Feder, chief executive officer of Radar Logic Inc., a research and analytics company that tracks home prices, said in a Bloomberg Television interview on June 10. Still, stabilization in home values in recent months is “in great contrast to last year,” he said.

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China’s manufacturing expanded for a third month, driving stocks to the biggest gain since March and adding to evidence that the economy is recovering.

The official Purchasing Manager’s Index was at a seasonally adjusted 53.1 in May after registering 53.5 in April, the Federation of Logistics and Purchasing said today in Beijing in an e-mailed statement. A reading above 50 indicates an expansion.

A surge in lending and investment and rising retail sales have spurred confidence that Premier Wen Jiabao’s 4 trillion yuan ($586 billion) stimulus package is reviving growth in the world’s third-biggest economy. U.S. Treasury Secretary Timothy Geithner said today that the global recession may be easing, helped partly by China’s “very forceful” measures.

“The Chinese economy is well on track for recovery and economic growth is picking up steam,” said Lu Ting, an economist at Merrill Lynch & Co. in Hong Kong.

The Shanghai Composite Index rose 3.4 percent, taking this year’s gain to 49 percent as investors bet that stimulus spending will revive earnings. Jiangxi Copper Co., the country’s biggest producer of the metal, surged 9.1 percent. Australia’s dollar traded near an eight-month high on optimism that demand for commodities will rise.

‘Signs of Improvement’

The world economy is seeing “initial signs of improvement,” Geithner said in Beijing today. He’s meeting Chinese leaders as they grapple with the nation’s deepest economic slump in almost a decade.

U.S. manufacturing probably shrank in May at the slowest pace in eight months, a further sign that the worst of the slump may be over, economists said before a report today. The Institute for Supply Management’s factory index rose to the highest level since September, according to the median forecast of 63 economists surveyed by Bloomberg News.

In China, a second manufacturing index released today, by CLSA Asia-Pacific Markets, also showed an expansion.

“For the first time the PMI shows genuine evidence that policy really is gaining traction,” said Eric Fishwick, head of economic research at CLSA in Hong Kong cash advance. A jump in orders and declines in companies’ inventories suggest “sustained output growth in months to come.”

By the end of April, China had built 20,000 kilometers (12,430 miles) of rural roads, 214,000 low-rent homes, 445 kilometers of highway, and 100,000 square meters (1.08 million square feet) of airport buildings under the stimulus plan, the National Development and Reform Commission said on May 21.

Industrial Output

“Economic growth may continue to pick up in the future as accelerating investment and consumer demand boost industrial production,” Zhang Liqun, an economist at the State Council Development and Research Center, said in a statement with the official PMI.

Zhang said that while business sentiment remains “weak,” a PMI reading above 50 shows that “the economy will continue to recover.”

In the government-backed PMI, the export order index increased to 50.1, the first expansion in 11 months. The output index fell to 56.9 from 57.4 and the new order index dropped to 56.2 from 56.6.

Dongfeng Motor Group Co., China’s third-largest automaker, said stimulus measures helped boost sales in the first four months of the year.

Industrial production growth may accelerate to 8 percent this quarter as stimulus spending gathers momentum, up from 7.3 percent last month and 5.1 percent in the first three months, the Ministry of Industry and Information Technology said May 22. Output may increase 10 percent in the second half, it added.

China’s economic growth may quicken to 6.8 percent this quarter from 6.1 percent in the first three months, according to a Bloomberg News survey of economists.

The official PMI, released jointly with the statistics bureau, spans measures of manufacturing activity including orders, inventories, output and employment.

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U.K. house prices stopped falling in May for the first time in 20 months, adding to evidence the property market slump is abating, a survey of real-estate agents by Hometrack Ltd. showed.

Average prices in England and Wales held at 155,600 pounds ($255,000) after they declined 0.3 percent in April, the London- based property researcher said in an e-mailed statement today. On the year, values dropped 9.6 percent. A separate report showed manufacturing contracted at the slowest pace in a year.

The U.K.’s worst recession in at least three decades may be easing as the Bank of England pumps newly-printed money into the economy. Data last week said that consumer confidence held at the highest level in almost a year and house prices unexpectedly jumped by the most since 2007.

“The survey shows that pricing expectations among vendors has finally re-aligned to a level that is more in line with what the current pool of purchasers are prepared to pay,” Richard Donnell, director of research at Hometrack, said in the statement. “The outlook for the economy remains far from certain. It is too early to rule out future price falls.”

The pound rose, surpassing $1.64 for the first time in seven months. The British currency traded at $1.6383 as of 11:26 a.m. in London.

New Buyers

The number of new buyers registering with real-estate agents to browse property rose 6 percent from April, when it increased by the same amount, Hometrack said. The percentage of the asking price achieved rose to 90.3 percent from 89.6 percent the previous month.

Six of the 10 regions tracked by the survey reported no change in house prices. In the East Midlands, the North West, the West Midlands and Yorkshire values declined 0 faxless payday loans.1 percent from the previous month.

Nationwide Building Society said last week that house prices increased 1.2 percent on the month, and U.K. consumer confidence matched an 11-month high in May, GfK NOP said.

House prices fell 0.3 percent in April from the previous month, and 16.2 percent from a year earlier, according to Land Registry data released today. London luxury-home prices fell about 20 percent in May from a year ago and probably won’t return to their 2008 highs for another five years, property broker Knight Frank LLP said in a separate report.

Other indicators are suggesting the recession may be past its worst. An index of manufacturing rose more than economists forecast in May to 45.4, the highest in 12 months, Markit said today. Results below 50 still indicate contraction.

EEF Report

The EEF manufacturing lobby group’s index of factory output based on a survey of 678 companies fell to minus 52 percent from minus 39 percent. The group’s forecasts show manufacturing growth will resume next year.

Across the U.K., jobless claims may rise by an average of 100,000 per month “for the next year or so, and this will be a shock for people,” former Bank of England policy maker David Blanchflower told the Today program on BBC Radio 4 today.

Bank of England policy makers, due to meet on June 4, will refrain from expanding their money-printing plan from the current 125 billion pounds, according to all but two of 39 forecasts in a Bloomberg News survey of economists.

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