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German consumer prices posted their highest annual gain in eight months in December after energy costs increased.

The inflation rate, calculated using a harmonized European Union method, rose to 0.8 percent from 0.3 percent in November, the Federal Statistics Office in Wiesbaden said today. That’s the highest level since April. Economists predicted prices would increase an annual 0.7 percent, according to the median of 19 forecasts in a Bloomberg News survey. From the previous month, prices rose 0.9 percent.

Crude oil prices have almost doubled in the past year, undermining confidence just as the economy recovers from the worst recession in more than six decades. While German economic growth accelerated in the third quarter, rising unemployment may prompt consumers to keep a rein on spending. The Bundesbank said this month that inflation will remain benign and predicted that unemployment will increase to 10.1 percent in 2011 from 8.1 percent today.

“Energy prices are still driving the inflation rate,” said Laurent Bilke, a former European Central Bank economist now at Nomura International Plc in London. “Underlying inflation, however, is still weak and is likely to remain so well into 2010.”

Germany’s economy emerged from the recession in the second quarter and growth accelerated to 0.7 percent in the third. Chancellor Angela Merkel’s government is spending 85 billion euros ($123 billion) to stimulate activity and the ECB has cut its benchmark rate to a record-low 1 percent as inflation risks remain contained.

‘Safely Below’

“Our interest-rate decisions are to be seen in connection with our price-stability goal, and in this context I do not see major threats for price stability in the near future,” ECB Governing Council member Ewald Nowotny said in an interview with Bloomberg News on Dec. 14. “Inflation rates will be on the positive side but it will be safely below the inflation target of the ECB.”

In the 16-nation euro area, consumer prices rose an annual 0.5 percent in November after declining 0.1 percent in the previous month. The ECB aims to keep inflation just below 2 percent. Data for December will be published on Jan. 5.

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Taliban fleeing a Pakistani offensive are regrouping in the country’s northwest, threatening to spread and prolong a conflict that has strained the nation’s economy and may hamper efforts to attract foreign investment.

While Pakistan says its month-old offensive in South Waziristan has destroyed the largest Taliban sanctuary, some militants are falling back to Orakzai, a mountain region less than 16 kilometers (10 miles) south of Peshawar, the capital of North West Frontier Province, said Talat Masood, an independent military analyst in Islamabad.

Rising violence in the region last year prompted London- based Tullow Oil Plc to give up operational control of drilling operations near Orakzai. A wider conflict may make it harder to attract companies like Mol Nyrt., Hungary’s largest oil refiner, which this month started natural gas production in the province.

“Naturally, this violence is not good for the investment climate, but the government’s decision this year to tackle the Taliban is a good one for the long term,” said Habib-ur-Rehman, who manages $48 million of stocks and bonds at Karachi-based Atlas Asset Management Ltd.

Peshawar, Pakistan’s eighth-largest city, suffered 11 major terrorist attacks this year, including a Nov. 19 suicide bombing at the main courthouse that killed 18 people. The city has a U.S. consulate and straddles the truck route for supplies from the port of Karachi to U.S. troops in landlocked Afghanistan.

Mountainous Trails

South of Peshawar, guerrillas are escaping over trails that snake through the mountains, military spokesman Major General Athar Abbas said in a Nov. 13 interview. While “sealing off the footpaths is not realistic,” the army is “preventing the militants from moving vehicles or heavy weapons,” he said.

Some escaped militants will abandon the Taliban movement and others will continue, making Orakzai the army’s possible next target, Abbas said. Pakistani air force jets have bombed Taliban positions there this month, killing as many as 20.

The fighting is hurting what the International Monetary Fund has called an “anemic” economy. Foreign aid and loans financed 40 percent of Pakistan’s $10 billion current account deficit in the year ended June 30, said Asad Farid, an economist at AKD Securities in Karachi. This year such assistance will entirely cover a deficit of $6 billion, he said.

Rising Cost

The war against the Taliban has been costing the government $8.5 billion a year, Finance Minister Shaukat Tarin said July 15. This year’s figure is higher, Tarin told reporters Nov. 16, declining to give details.

Successes in South Waziristan, where the army has captured militant strongholds and main roads, may revive an argument with the Obama administration over which Taliban factions Pakistan’s forces should strike next payday loans guaranteed no fax. U.S. National Security Adviser James Jones has renewed pressure for Pakistan to hit the groups that attack U.S.-led forces in Afghanistan, the New York Times reported Nov. 15, citing unnamed U.S. officials.

“The Pakistani response to any new U.S. demand will be the same as before: that they have no resources to open a new front,” said Shuja Nawaz, director of the South Asia Center of the Atlantic Council in Washington.

The army’s current offensive targets a Taliban faction in South Waziristan that opposes Pakistan’s government, which blames it for 80 percent of Islamic attacks in the country. While Taliban groups that fight in Afghanistan are based nearby in North Waziristan, Abbas said the army has no plans to expand its assault there.

Shifting Focus

“Cost and security reasons” led oil developer Tullow to hand over control of a drilling project at Kohat, near Orakzai, to its local partner, spokesman George Cazenove said in an e- mail. “Because they are no longer the operator, the number of Tullow employees in Pakistan has been reduced significantly,” although Tullow retains a 40 percent stake in the project, Cazenove said.

Budapest-based Mol, Hungary’s largest oil refiner, began production at its Manzalai field last week after an initial investment of $500 million. Initial output of 250 million cubic feet of gas a day will be increased 40 percent to 350 million cubic feet by 2013, Mol Chief Executive Officer Gyorgy Mosonyi told a press conference in Islamabad on Nov 11.

“We are reducing risk to the possible minimum,” the company said in a statement in response to questions about security. “Operations at both the office in Islamabad and at the countryside facilities are continuous and uninterrupted.”

The Karachi Stock Exchange 100 Index fell 2.1 percent last month, the most since January, as bombings and assaults in major cities eroded confidence.

Sanctuary Disrupted

The South Waziristan campaign will improve Pakistan’s security because it has disrupted the country’s largest Taliban sanctuary, said Mahmood Shah, an analyst who once served as security chief for the border zone.

“We should see a reduction in the attacks within as little as two weeks,” Shah said.

On Oct. 17, the army sent 28,000 troops into the lands of the ethnic Pashtun Mehsud tribe, which has about 5,000 to 8,000 Taliban fighters, Abbas said. The battlefield is a forested, mountainous zone of 2,200 square kilometers, about half the size of the U.S. state of Rhode Island.

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India’s central bank must tighten its monetary policy “fairly soon” to stem inflation, the Organization for Economic Cooperation and Development said.

“Given the magnitude of easing and the speed at which inflation has bounced back, monetary policy will need to be tightened fairly soon,” the Paris-based OECD said about India in a report released yesterday.

Expectations of higher interest rates have sent Indian bond prices down by 5.9 percent in 2009, the worst performance among 10 Asian local-currency debt markets tracked by HSBC Holdings Plc. The central bank took the first steps to raise borrowing costs last month by ordering lenders to set aside a bigger proportion of their deposits in government bonds.

India’s consumer price index for industrial workers may average 5.4 percent in the 12 months starting April 1, more than double the rate in the current year, the OECD said. During the same period, India’s economic growth may accelerate to 7.3 percent from 6.1 percent, it estimates.

Central bank Governor Duvvuri Subbarao has injected 5.85 trillion rupees ($126 billion) of cash into the economy since September 2008 to protect India from the worst financial crisis since the 1930s.

In the last monetary policy announcement on Oct. 27, Subbarao raised the statutory liquidity ratio to 25 percent from 24 percent and kept the benchmark policy rates unchanged . He maintained the central bank’s economic growth forecast for the year ending March 31 at 6 percent “with an upward bias.”

Inflation Pressures

“Given that activity is expected to strengthen relatively quickly and that the recovery is likely to have begun with only a modest level of slack in the economy, delayed fiscal consolidation will also contribute to higher inflationary pressures,” the OECD said.

India also loosened the fiscal policy to stimulate the economy amid the global recession, cutting excise and customs tax rates, raising government salaries and stepping up spending on roads and power.

As a result, India’s national budget deficit, including federal and state government finances, may reach 10.1 percent of gross domestic product in the year ending March 31 from 4.2 percent of GDP two years ago, the OECD said.

The OECD said it projects only a “modest narrowing” in the budget shortfall because much of the increase in expenditure in the past year, such as the rise in salaries of government workers, is permanent in nature.

The deficit is forecast by the OECD to narrow to 9 percent of GDP in the next financial year starting April 1.

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Hitachi Ltd, Japan’s biggest electronics firm by sales, will raise up to $4.6 billion to shore up its capital, joining a scrum of Japanese firms tapping equity markets before a possible economic slowdown.

Hitachi, which is headed for its fourth straight annual loss, said it will raise up to 416 billion yen after fees, issuing 318 billion yen worth of shares and convertible bonds worth 100 billion yen.

The Monday announcement came as its shares headed for their biggest single-day slide in six months after sources told Reuters about the public stock issue, Hitachi’s first in 27 years.

Hitachi, which has a joint venture with General Electric in nuclear power, will invest in its nuclear power, software services and lithium-ion batteries operations, while trimming losses.

But Hitachi has been forced to seek money before it could form a realistic plan for recovery, some analysts said.

“This amount is the absolute limit that Hitachi can seek from markets, but this may not be enough even to cover restructuring costs at such a mammoth firm, let alone invest in growth,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co.

“I don’t think investors will want to put their money in. There are so many more deserving companies that need funds.”

The share issue would boost Hitachi’s shares outstanding by more than 30 percent.

Hitachi, like many of its once high-flying peers, has lost market share in flat TVs and digital devices to rivals from South Korea and Taiwan, and is eager to focus its sprawling operations in growth such as in lithium-ion batteries and smart grids.

A sprawling conglomerate with more than 900 group firms, Hitachi has repeatedly said it will trim losses and focus on growth areas.

It said it will use the funds it raises to boost production capacity of nuclear reactors and lithium-ion batteries, to expand its software services operations and to spend more on research on its train systems.

But Hitachi, which supplies lithium-ion batteries to General Motors, remains weighed down by losses on its flat TVs and microchips.

It must shoulder an investment of about 80 billion yen to pave the way for a merger of Renesas Technology — its chip venture with Mitsubishi Electric — and chipmaker NEC Electronics next year.

Battered by deep losses, Hitachi’s shareholders’ equity ratio has slipped to just below 11 percent, roughly half that of rival NEC Corp, which earlier this month announced it would raise up to $1.5 billion.

The ratio is calculated by dividing shareholders’ equity by total assets and is a measure of financial strength. 

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Unemployment rose in 23 U.S. states in September and hit records in Nevada, Rhode Island and Florida.

Nevada’s jobless rate, at 13.3 percent, was the second- highest among U.S. states behind Michigan, the Labor Department said today in Washington. Unemployment in Rhode Island reached 13 percent, and Florida’s rate climbed to 11 percent, the highest since data began in 1976.

Mounting unemployment is hurting state budgets by cutting tax revenue and boosting benefits to fired workers. Joblessness nationally will reach 10 percent this quarter, a Bloomberg News survey of economists showed this month, indicating consumers will probably not lead a recovery from the recession.

“There is still scant evidence of hiring,” said Marisa Di Natale, a director at Moody’s Economy.com in West Chester, Pennsylvania. “We expect the unemployment rate in most areas to continue rising despite fewer job cuts,” she said.

The number of states with at least 10 percent unemployment held at 14 last month. The jobless rate nationally reached a 26-year high of 9.8 percent in September, the Labor Department reported earlier this month.

Unemployment in the District of Columbia also exceeded 10 percent for a fifth consecutive month, rising to 11.4 percent from 11.1 percent.

Michigan Unemployment

Michigan continued to lead the nation in joblessness, with a rate of 15.3 percent in September, up from 15.2 percent.

The depressed labor market in the state reflects Michigan’s dependence on the auto industry, said Timothy Bartik, a senior economist with the W.E. Upjohn Institute in Kalamazoo, Michigan, a non-profit labor-research group.

“Any state that specializes in a particular industry, when that industry tanks, it’s very hard to offset in any five- or 10-year period.”

New York City’s unemployment rate reached a 25-year high of 10.3 percent in September, the state’s Labor Department reported last week. The rate was 10.2 percent in August and 6 percent in September 2008. The state’s jobless level held at 8.9 percent.

New Jersey, Connecticut

New Jersey’s rate rose to 9.8 percent, the highest level since 1977, from 9 no fax payday loan.6 percent, the state’s Labor Department said Oct. 14. Joblessness in Connecticut climbed to 8.4 percent, also the highest in 32 years, from 8.1 percent, according to the U.S. Labor Department.

“The economy right now is very bad,” said Ireita Kante, 52, of Atlanta, who lost her restaurant management job this month. “I do have confidence we will turn around. We have to. We are a strong country.”

Georgia’s unemployment rate held at 10.1 percent.

Payrolls fell last month in 43 states and the District of Columbia, today’s report showed. New York showed the biggest drop with an 81,700 decrease. The decline reflected a 63,400 drop in government payrolls, which the state said was caused by the expiration of the summer youth employment program.

Texas followed with a 44,700 drop in payrolls and California was next with a 39,300 decrease.

Round Rock, Texas-based Dell Inc., the world’s second- largest maker of personal computers, is among companies still paring staff to cut expenses. Dell said this month it will shutter a North Carolina factory with 905 employees by January. The job cuts are part of the company’s objective of saving $4 billion a year in costs as demand for computers declines.

Cutting Costs

“We set out a pretty big cost goal for ourselves,” Michael Dell, chief executive officer of the Round Rock, Texas- based company, said Oct. 14, a week after announcing the closure of the PC factory. “It’s looking like the $4 billion is quite achievable.”

Over the last year, California showed the biggest loss of jobs, with payrolls falling by 732,700 workers, more than twice Florida’s 360,400 decrease that was the second-biggest.

Payrolls in the world’s largest economy fell by 263,000 last month, more than forecast, the Labor Department reported earlier this month. The U.S. economy has lost 7.2 million jobs since the recession started in December 2007, the most of any downturn since the Great Depression.

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Bundesbank President Axel Weber said stimulus for the German economy shouldn’t be withdrawn too fast even as its recovery from the deepest recession since World War II accelerates.

The economy, Europe’s biggest, probably expanded around 0.75 percent in the third quarter from the previous three-month period, when it grew 0.3 percent, Weber told reporters before a meeting of finance ministers and central bankers from the Group of Seven in Istanbul today. While “the general economic trend is pointing upward,” the recovery “continues to rely on support from fiscal and monetary policies, and that shouldn’t be withdrawn too quickly,” he said.

Germany’s government is spending about 85 billion euros ($124 billion) to revive growth, including investment in infrastructure and a 2,500-euro payment for people who scrap an old car to buy a new one. The European Central Bank has also cut interest rates to a record low and is flooding banks with cheap cash in an effort to get them lending again. The recovery could falter if those measures are removed too soon.

The International Monetary Fund today said central banks in Europe should keep interest rates low and possibly extend non- standard stimulus measures because the region’s economic recovery is likely to be “slow and fragile.” Germany’s economy will contract 5.3 percent this year and expand 0.3 percent in 2010, the IMF predicted.

Stabilization

“Signs of stabilization are clearly to be seen,” German Deputy Finance Minister Joerg Asmussen said at the joint press conference with Weber. “We still have a relatively stable situation in the labor market.”

The number of people out of work rose 10,000 in September on a seasonally adjusted basis, before statistical changes are taken into account, the Nuremberg-based Federal Labor Agency said Sept. 30. Including the changes, unemployment declined by 12,000 to 3.46 million. Economists had forecast an increase of 20,000, according to the median of 27 estimates in a Bloomberg News survey online payday loans.

“We see risks for the labor market,” Weber said. “We’re concerned that unemployment may rise in the course of next year and that would hurt consumer spending.” Germany’s gross domestic product may not return to last year’s level before 2013, Weber said.

Tax Cuts

While Chancellor Angela Merkel’s prospective coalition of Christian Democrats, the Christian Social Union and the Free Democratic Party may seek to cut taxes to spur the economy, Weber said any reductions have to be offset by spending cuts to ensure government borrowing can be brought under control.

Germany, the world’s biggest exporter, was hammered by the global recession as sales of Wolfsburg-based Volkswagen AG cars and Munich-based Siemens AG equipment slumped.

Weber, who’s also an ECB council member, said the central bank hasn’t decided yet when it will reverse “unusual interest- rate cuts and excess liquidity” provisioning. While the ECB will have to raise rates and withdraw stimulus at some stage, that doesn’t mean “we’re at that point already,” he said.

With Germany relying on foreign sales, Weber said he welcomed U.S. Treasury Secretary Timothy Geithner’s statement that a “strong dollar is very important” to the U.S.

The dollar’s 14 percent drop against a basket of seven currencies since early March is threatening to undermine economic recoveries outside the U.S. by making their exports more expensive.

Canadian Finance Minister Jim Flaherty said on arriving in Turkey late yesterday that he’s “concerned” about “upward pressure on the Canadian dollar” from the weaker U.S. currency. French Finance Minister Christine Lagarde told reporters yesterday that “everyone needs a strong dollar.”

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Hirohisa Fujii, Japan’s new finance minister, says he doesn’t support a weak yen. The world’s biggest banks say that’s just what he may get.

While the yen gained against all but one of the 16 most- actively traded currencies since early August as the Democratic Party of Japan became the likely winner in national elections, forecasters say it will decline 5.2 percent against the dollar and 0.7 percent versus the euro by year-end. The economy is too weak to support a stronger rate, based on the median of 40 estimates in a Bloomberg survey.

Japan will be the only Group-of-10 nation that won’t raise borrowing costs in 2010, keeping its benchmark interest rate at a record low 0.1 percent, the survey shows. The economy will expand 0.8 percent next year after contracting 6 percent in 2009, according to median forecasts, putting assets in the world’s second-biggest economy at a disadvantage to those in countries with higher borrowing costs.

“Everyone is seemingly buying the yen, which I think is ridiculous,” said Jim O’Neill, head of global economic research at Goldman Sachs Group Inc. in London. “The true underlying fundamentals for the yen in my book have deteriorated significantly.”

New York-based Goldman Sachs, which earned more than $100 million from trading for a record 46 days last quarter, predicts the yen will weaken to 98 per dollar and 142 per euro by the end of the year, from 92.23 and 135.25 as of 7:09 a.m. in New York today. Bank of America Corp., the biggest U.S. bank, and HSBC Holdings Plc, the largest in Europe, are even more bearish.

Yen’s Rally

The yen rallied 6.6 percent against the dollar and 3.3 percent compared with the euro as the Democratic Party of Japan, led by Yukio Hatoyama, 62, gained in the polls on the way to an election victory in the lower house of Parliament on Aug. 30 that broke 55 years of almost uninterrupted rule for the Liberal Democratic Party. Only the South African rand has risen more.

During the campaign, the DPJ said a stronger yen will boost household spending by making imported goods less expensive. That’s in contrast to the former administration’s focus on public works spending and keeping the yen weak to help exporters.

Fujii, 77, reiterated that message on Sept. 16, the day the DPJ officially took over, saying he doesn’t support a “weak yen.” The comments drove the currency to 90.13 per dollar, its strongest level since February. The following day, he said it was an “absurd idea” that a weak yen is better for exports.

Suffering Exporters

Shares of Aichi-based automaker Toyota Motor Corp., which makes about 75 percent of its revenue outside of Japan, dropped 1.1 percent on the day of Fujii’s comments even as the Nikkei 225 Index added 0.5 percent.

In a Cabinet Office survey released April 22, exporters said they can remain profitable as long as the yen trades at 97.33 per dollar or weaker. A rising currency hurts exporters by making their goods more expensive to foreign buyers and reducing the value of profits earned abroad. Exports account for 12 percent of Japan’s economy, compared with 6 percent in the U.S.

Tokyo-based Canon Inc., the world’s biggest maker of office equipment, said in its latest financial report every 1 yen change against the dollar would alter its second-half operating profit by 4.2 billion yen ($46 million).

“Fujii’s words will come to haunt him,” said Richard Benson, who oversees $14 billion of currency funds at Millennium Asset Management in London. “The DPJ’s strong-yen policy will hurt the Japanese stock market, leading domestic investors overseas in search of returns, selling the yen in the process.”

Exports Plunge

Exports plunged at an unprecedented 26 percent rate in the three months ended March 31, contributing to the economy’s record 15.2 percent contraction in the quarter. The public debt is almost 200 percent of the economy, compared with about 48 percent in the U.S., according to data compiled by Bloomberg.

The surplus in Japan’s current account, the broadest measure of trade because it includes investment, is shrinking relative to the size of the economy. The measure will fall to 2.1 percent of gross domestic product this year, based on median estimates in Bloomberg economist surveys, from 4.8 percent in 2007 and 3.2 percent in 2008. The household savings rate will drop to 2 percent this year from 3.3 percent in 2008 and more than 10 percent a decade ago, Goldman Sachs says insurance quotes.

Strength ‘Illusion’

“Yen strength is an illusion with short-term investors,” said Tomoko Fujii, Tokyo-based senior currency strategist at Bank of America Securities-Merrill Lynch. The Charlotte, North Carolina-based firm expects the yen to weaken to 105 per dollar and to 158 per euro by Dec. 31. “They’re jumping to the conclusion that the government change will boost the yen, but that’s not the case because there’s no benefit in killing off the exporters,” she said.

Deutsche Bank AG, the world’s biggest currency trader, says the yen will rally to 80 to the dollar by year-end. U.S. interest rates near zero will encourage investors to finance purchases of higher-yielding assets with the U.S. currency at the same time that the improving world economy boosts demand for Japan’s exports.

“Yen is back,” Bilal Hafeez, Deutsche Bank’s London-based head of foreign-exchange strategy wrote in a report to clients on Sept. 17. “The yen may end up being the biggest winner against the dollar.”

The three-month dollar London interbank offered rate, or Libor, fell below the comparable Japanese rate last month for the first time since April 1993. Dollar Libor was 0.29 percent on Sept. 18, while yen Libor was 0.35 percent, according to the British Bankers’ Association in London.

Options Bets

Options traders are betting the yen will rise against all other Group of 10 currencies in the next three months. The cost of contracts used to bet the yen will appreciate versus the dollar are the most expensive relative to those betting on a decline since July 30, so-called 25-Delta Risk Reversals show.

Japanese investors are showing less confidence in their currency. They bought the most foreign bonds in four years last week, purchasing a net 1.66 trillion yen in the period to Sept. 12, according to Ministry of Finance figures released Sept. 17.

The drop in short-term rates reduces the expenses of hedging purchases of foreign bonds, said Keiko Onogi, a Tokyo- based debt strategist at Daiwa Securities SMBC Co., a unit of Japan’s second-largest brokerage.

Exchange Rates

Individual investors in Japan added to foreign currency mutual funds every month since January, according to Investment Trust Association data. Assets in the funds reached 26.9 trillion yen in August, the most since September and up from 20.7 trillion yen in January.

Bank of Japan Governor Masaaki Shirakawa told reporters in Tokyo on Sept. 17 that while stimulus measures, including buying $20 billion of government debt a month, have helped the economy, policy makers are “not confident about the strength” of consumer demand “after those effects fade.”

The central bank is monitoring the exchange rate, which is contributing to a drop in inflation, he said. Consumer prices excluding food plunged at a record 2.2 percent pace in July while the jobless rate hit an unprecedented 5.7 percent the same month, government reports showed.

“The yen is inappropriately strong,” said David Bloom, global head of foreign-exchange strategy in London at HSBC. The government “will mind given the massively deflationary threat Japan is still facing,” he said.

HSBC, the biggest European bank, is telling its clients that the currency will weaken to 105 per dollar and 158 per euro by March 31.

Intervention History

Japanese officials have responded to yen strength in the past by intervening in currency markets, including when Fujii was finance minister between 1993 and 1994. Authorities sold the currency on all four of the last five times since 1995 when the yen approached the 100-per-dollar mark to support exporters.

The Bank of Japan, on behalf of the Ministry of Finance, sold a record 20.4 trillion yen in 2003 and 14.8 trillion yen in the first quarter of 2004, when it traded as high as 103.42 per dollar. The yen declined to an eight-month low of 114.88 versus the dollar in May that year.

“I suspect the people at the Bank of Japan and the Ministry of Finance will start briefing Fujii on what he should and shouldn’t say,” said Neil MacKinnon, global macro strategist in London at VTB Capital Plc, an investment bank. “Incoming policy makers often make a public view on a currency, only for it to be clarified, reviewed or withdrawn once their advisers have a word with them.”

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Confidence in the world economy held at a record high in September after reports suggested the recession is over and officials said they won’t rush to withdraw stimulus, a Bloomberg survey of users on six continents showed.

The Bloomberg Professional Global Confidence Index rose to 58.54 this month from 58.12 in August. The index exceeded 50 for a second month, which means there were more optimists than pessimists. Measures of confidence in France and Germany surged after their economies unexpectedly grew last quarter.

The world is emerging from the deepest recession since the 1930s after more than $2 trillion of infrastructure projects, tax breaks and government spending, and interest rates near zero averted a spiral into another Great Depression. The pace of the rebound may be tempered by rising unemployment, which the White House predicts will surpass 10 percent next year in the U.S.

“Now we have to see if the increase in confidence is matched by actual growth,” said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, and a survey participant. “The recovery is still fragile.”

The survey of more than 1,800 Bloomberg users was conducted between Sept. 7 and Sept. 11. Since the previous survey, President Barack Obama signaled the U.S. economy is expanding again and the European Central Bank raised its growth forecasts. Finance ministers from the Group of 20 also committed to continuing emergency measures to help strengthen the recovery.

Manufacturers Optimistic

Asian stocks rose today. The MSCI Asia Pacific Index climbed 1 percent to a one-year high of 118.81 as of 12:55 p.m. in Tokyo as commodity prices jumped. Japan’s manufacturers turned optimistic for the first time in almost two years, a government survey also showed today.

The Federal Reserve last week said 11 of its 12 regional banks reported signs of a stable or improving economy in July and August. A measure of U.S. participants’ confidence in the world’s largest economy was unchanged at 47.3, the survey showed, after jumping from 29.5 the previous month.

Warren Buffett, the billionaire investor who last year called the financial crisis an “economic Pearl Harbor,” said Sept. 15 that the U.S. economy has “hit a plateau at bottom.”

“We have not bounced but we’ve quit going down,” Buffett, the 79-year-old chief executive officer of Berkshire Hathaway Inc., said in an interview on CNBC.

Stimulus Spending

Fed Chairman Ben S. Bernanke said Sept. 15 that the U.S. recession has probably ended even as he warned the expansion may not be strong enough to immediately bring down unemployment. Policy makers last month left the key interest rate between zero and 0.25 percent and said economic conditions mean the rate will stay “exceptionally low” for an “extended period.”

In Europe, where companies such as ASML Holding NV, the region’s largest maker of semiconductor equipment, are raising sales forecasts, officials have signaled they will keep stimulus measures to ensure the economy is back on a more stable footing.

ECB President Jean-Claude Trichet this month said the euro region’s recovery from recession will be “bumpy.” He viewed current interest rates, at the lowest level since the ECB took charge of rate policy in 1999, as “appropriate.” The confidence gauge for western Europe rose to 43.2 from 41.1.

“Policy makers need to be careful not to withdraw support too quickly,” said Guy LeBas, chief economist at Janney Montgomery Scott LLC in Philadelphia free credit report online. “There’s potential for conditions to deteriorate,” he added.

Latin America

Sentiment dropped the most in Spain, where unemployment is approaching 20 percent, the highest level in Europe. Spain’s economy contracted for a fifth quarter in the three months to June, and inflation is slowing more sharply than in the euro region overall. Spain’s index fell to 14.5 from 24.7.

Confidence rose the most in the Latin American region this month, with its index advancing to 65.5 from 57.6 in August. Brazil, the region’s biggest economy, emerged from recession last quarter amid rising domestic demand, and its Bovespa stock index has doubled this year. Brazil’s confidence measure rose to 88.2 from 80.6, the survey showed.

“Emerging markets in Asia and Latin America will continue to be the frontrunners of global economic growth,” said Tai Hui, head of Southeast Asian economic research at Standard Chartered Plc in Singapore. “Commodity prices are rising and that will help lift the economies.”

Japanese Election

Sentiment fell in Japan, where elections last month resulted in a victory for the Democratic Party of Japan as it ousted the party that ruled the nation for all but 10 months since 1955. The gauge for Japan fell to 48.8 from 50, while that of Asia slipped to 73.6 from 74.2.

Bloomberg users were less optimistic on the outlook for their equity markets in the next six months amid concern gains may not be sustained. The global equity rally has added about $17.5 trillion to the value of stocks worldwide since this year’s low on March 9. Respondents in Japan and the U.S. expect shares to decline, while those in the U.K. and Brazil predict their markets will extend their advances.

“Stock markets have become extremely frothy, people think equity prices are a little ahead of the world economic recovery,” Rupkey of Bank of Tokyo-Mitsubishi UFJ said. “It’s a natural place to pause and take stock.”

The U.S. dollar may weaken further in the next six months against the world’s most actively traded currencies, with sentiment at an 18-month low. Gold prices exceeded $1,000 an ounce this month as the dollar declined, bolstering demand for the precious metal as an alternative investment. The dollar confidence index fell to 30.8 from 38.8 in August.

Stronger Yen

Users in Japan expect the yen to strengthen against the dollar, with the index rising to 62.1 from 50.3. Most respondents in western Europe are less optimistic on the euro’s appreciation against its U.S. counterpart.

Survey participants in Japan and some western European nations are also less confident short-term interest rates will rise in the next six months, the survey showed. The Australian central bank this month said it was seeking to avoid “prematurely tightening” monetary policy after leaving rates unchanged for a fifth meeting.

“It’s very sensible on the part of officials to keep policies loose, and it will probably stay that way for an extended period of time,” Hui of Standard Chartered said. “Any inflationary threat is still a long way away and economies need all the help they can get.”

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Nations in Asia and Europe wouldn’t automatically return to recession if the U.S. economy contracts again, Nobel Prize-winning economist Joseph Stiglitz said.

Stiglitz forecast last week a “significant chance” the U.S. will slip back into recession after a brief recovery. While that would have a “negative effect” on the rest of the world, it wouldn’t prevent other economies from expanding, he said in an interview today in Reykjavik, Iceland.

“Asia is restructuring itself to be less dependent on the U.S. and they have huge reserves,” Stiglitz, a Columbia University professor, said. “So they could continue on the path of recovery.”

Although it would be “very hard for Europe to have a robust recovery with a weak America,” Stiglitz said, “one of the things that brought down the markets over the world was the credit crunch. The credit crunch was a result of a total lack of faith in the banks. What we’ve done is we’ve put enough capital in the banks, so people are probably willing to say that the banks can meet their obligations payday loans.”

That doesn’t mean the U.S. banking system is out of the woods, he said. There are still millions of mortgages in the process of being foreclosed, and commercial real estate “is in a shambles,” Stiglitz said. That makes it likely many more banks will be taken over by the government, although “enough conniving between the regulators and the banks might get us to muddle through.”

The U.S. government doesn’t want a major bank to fail and imperil the financial system, he said. “Banks aren’t bankrupt unless the government says they are,” Stiglitz said. “So there is a reasonable chance that even if the banks are truly bankrupt, they won’t be bankrupt.”

Stiglitz, 66, won the Nobel Prize in economics in 2001 for showing that markets are inefficient when all parties in a transaction don’t have equal access to critical information, which is most of the time.

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HAZELWOOD — Seventy years ago this summer, James S. McDonnell opened his new company, McDonnell Aircraft Corp., at Lambert Field.

McDonnell wasn’t from here but his choice came down to St. Louis and Memphis, Tenn. McDonnell chose St. Louis and moved his family here from Baltimore. And the rest, one might say, is aviation history.

Top executives of the Boeing Co. on Thursday marked those first 70 years of Boeing and its predecessors — McDonnell Aircraft and McDonnell Douglas Corp. — in St. Louis. The celebration was attended by hundreds of employees, local political leaders and organized labor.

Boeing’s defense arm is the second-largest employer in the St. Louis region with about 16,000 workers.

While celebrants focused mostly on the local history of military aircraft and weapon manufacturing, elected officials made a familiar plea for continued funding of the C-17 Globemaster III transport plane and the F/A-18 Super Hornet. The two Boeing-built aircraft are threatened by a shift in Pentagon spending priorities.

Secretary Robert Gates proposed capping U.S. orders for the C-17 at the 205 already in use or in production and a scaled-down purchase of F/A-18s in next year’s budget.

But Congress provided funding for eight more C-17s in this year’s emergency war spending bill.

Last week, Sen. Christopher S. "Kit" Bond, R-Mo, co-authored a letter seeking funding for a dozen more of the Boeing-built transporters in next year’s defense appropriations bill.

"We’re fighting hard," said Bond. "I would hope we could get 15 C-17s. With a tight budget, that may be much. I would like to see a multiyear (purchase) for the F/A-18s. We can make it more efficient for Boeing … if we give them a plan for buying over several years. And that makes it cheaper for the taxpayers."

Bond added that there is a "minimum amount of high enthusiasm" for such a deal in the Pentagon.

Sen. Claire McCaskill, D-Mo., said she has heard military members speak in glowing terms about the capabilities of the F/A-18s and C-17s.

"Pound for pound, dollar for dollar, capability, reliability, you have built a tremendous fighter jet," McCaskill said of the Super Hornet.

George Roman, St. Louis regional executive of Boeing Integrated Defense Systems, and John Van Gels, St. Louis senior site executive, said the fate of federal spending on the aircraft will become clear this fall.

"It’s a long fight still," Roman said.

Boeing shares rose $4 to $51.82 a share on Thursday amid news that its long-delayed 787 Dreamliner passenger jet should be ready for its first flight by the end of this year.

"While there is no question that the execution of this program has had its challenges, … the 787 … remains on track to be a game changer for our airline customers," Boeing President and CEO Jim McNerney said in a conference call on Thursday.

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