August 20, 2009 / 5:46 PM / 9 years ago

TOPWRAP 4-Stronger US economy rebound seen but worry remains

* Poll: Economists see stronger-than-expected US recovery

* But one-in-four chance of US recession “double dip” seen

* US regional manufacturing rises, as do jobless claims

* Germany, Japan concerned on economic recovery’s strength

* World policymakers set to meet in Jackson Hole, Wyoming

(For more on the global financial crisis, double-click on [nCRISIS])

By Will Dunham

WASHINGTON, Aug 20 (Reuters) - The U.S. economy is bouncing back more robustly than expected from its worst recession in 70 years, economists said in a poll on Thursday, and U.S. regional manufacturing rose, but worry remained about a “double-dip” recession with renewed growth followed by another contraction.

Officials in Germany and Japan expressed doubt on the global recovery’s strength, adding to worries that emerging growth may falter without sustained government stimulus.

U.S. growth is expected to return in the current quarter while economic heavyweights such as Germany, Japan, France and Hong Kong already have emerged from recession, leading markets to rise and governments to consider winding down stimulus programs.

Three new reports underscored the uneven nature of the U.S. economic recovery.

Manufacturing in the U.S. Mid-Atlantic region expanded in August, snapping a 10-month streak of contraction to reach its highest point since November 2007 and exceed even the most optimistic forecasts, the Philadelphia Federal Reserve Bank said. For more see [ID:nN20516471].

The index of leading economic indicators, which is supposed to forecast U.S. economic trends six to nine months ahead, rose in July for a fourth straight month, according to the Conference Board, a private research firm. [ID:nN20513774]

But a report from the U.S. Labor Department illustrated the fragile state of the jobs market. Initial applications for state unemployment insurance benefits unexpectedly rose 15,000 to a seasonally adjusted 576,000 last week, tempering some of the optimism. [ID:nN20510281]

U.S. stocks rose [.N] on the back of a rally in Asian and European markets.


After shrinking by 1.0 percent in the second quarter on an annualized basis, U.S. gross domestic product will grow 2.4 percent in the current quarter and 2.2 percent in the final three months of the year, according to a sample of around 70 economists in a Reuters poll. [ID:nLAG003672]

The recovery is now expected to be stronger than economists predicted last month, when they saw growth of 0.8 and 1.8 percent in the third and fourth quarters, respectively.

High unemployment, which the poll showed topping out at 10 percent, and a massive debt load on the shoulders of consumers will dog the economy after the initial recovery. The economists forecast a 25 percent chance of a “double-dip” recession.

“Recent data suggest that the economy is near a bottom, but the recovery is likely to prove to be lengthy, gradual and fragile,” said Scott Brown, chief economist with Raymond James & Associates in St Petersburg, Florida.

Reuters polls on G7 economies also showed analysts had raised their views on the third quarter, but that many were subdued about 2010. [ID:nLK651489]

Recent talk of ending some measures taken to combat the worst financial crisis since the 1930s is being overtaken by words of caution on the rebound’s strength before a G20 leaders summit in Pittsburgh next month to discuss financial reform.

Policymakers from around the world are gathering in Jackson Hole, Wyoming, this week to think about how to prevent the crisis from happening again. [ID:nN19476446] Fed Chairman Ben Bernanke speaks at 8 a.m. Mountain time (1400 GMT) on Friday to reflect on the lessons learned and assess whether signs of recovery are lasting.

Bank of Japan board member Atsushi Mizuno said Japan’s export recovery may slow, starting in the autumn, suggesting he may favor extending steps such as buying commercial paper and corporate bonds beyond December. [ID:nT169364]

“Global financial and economic conditions remain fragile and can’t achieve a sustained recovery without support from governments and central banks,” Mizuno said.

Germany’s Finance Ministry said it was not clear whether the economy’s return to growth would last. [ID:nLJ145035]

Germany posted unexpected growth in the second quarter but economists said the bounce relied heavily on government stimulus.

The U.S. earnings picture was mixed. Packaged food makers H.J. Heinz Co HNZ.N and Hormel Foods Corp (HRL.N) both beat Wall Street estimates while retailer Sears Holding Corp (SHLD.O) posted a surprise loss, sending its shares down.

Hurricane Bill weakened a bit in the Atlantic but was expected to regain power on a northwest ocean track and was forecast to reach Canada’s Atlantic Maritime provinces by Sunday. [ID:nN20522839] (Additional reporting by Reuters bureaux around the world; Editing by James Dalgleish)

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