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US, Global Economic Reports Are Mixed


There is cautious optimism in European markets after new figures released Thursday showed the recession easing in Germany and France. Reports show the GDP (Gross Domestic Product) in the two largest economies in Europe rose three-tenths of a percent in the second quarter, boosting hopes of an early recovery in the broader Euro-zone.

In the U.S., the economic picture also appears to be improving despite troubling new worries about the nation's burgeoning deficit and rising home foreclosures.

European stocks climbed Thursday following an unexpected rise in the gross domestic output of Germany and France. The increase in the value of goods and services produced by two of Europe's largest economies marks a significant improvement, after four straight quarters of declines.

Christian Dreger, the senior economist at Germany's Institute for Economic Research said the new data means "the recession is apparently over," but investment trader Stefan Schaffeter was more reserved in his assessment.

"I think, it's still more careful wishful thinking," Schaffeter says, "The figures have stabilized as we heard. Some experts foresee for the next quarter, a slowly growing gross domestic product. We are hopeful that we have left the deepest part of the recession at least."

The modest recovery has fueled optimism of a faster rebound among the 16 countries that use the euro. But the unexpected bounce worries some European manufacturers who worry a higher euro could make their products more expensive in export markets.

In the U.S., stock prices vacillated in early trading as government data showed retail sales dropped one-tenth of a percent last month. The drop comes despite the success of the government's "Cash for Clunkers" program, which has already boosted auto sales by more than two percent.

Economists watch retail sales closely because consumer spending accounts for two-thirds of the U.S. economy.

But while the U.S. Federal Reserve says economic activity is starting to stabilize, a record number of Americans are still in danger of losing their homes and their jobs. Foreclosure filings rose 7 percent last month, while weekly jobless claims rose faster than expected.

More troubling, say experts, is the ballooning debt. Last month, the government added another $180 billion to the deficit. ABC News financial analyst Charles Herman says,
"The rising deficits are a testament to the fact that the government is spending a lot of money to try and fix the economy, and all signs appear that the economy is getting better. The worry is long-term - how do we deal with thee big deficits?"

At nearly $1.3 trillion, the federal deficit is the largest ever. Analysts say it could reach nearly $2 trillion by September.

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