Central Bankers See Turning Point Near

By CHRISTOPHER EMSDEN in Milan, NINA KOEPPEN in Basel and PAUL HANNON in London, WSJ.com

Central bankers see an economic turnaround coming -- though not just yet.

"We are, as far as growth is concerned, around the inflection point in the cycle," European Central Bank President Jean-Claude Trichet said at a news conference on Monday after a regular meeting of global central bankers in Basel, Switzerland. Mr. Trichet is chairman of the group.

Bolstering that view, data from the Organization for Economic Cooperation and Development on Monday showed that some of the world's leading economies may be on the path to recovery. Jean-Claude Trichet, president of the European Central Bank, gestures during a news conference at the ECB headquarters in Frankfurt on May 7, 2009.

However, the ECB chief cautioned against an overly optimistic outlook. "There has been a substantial improvement in the markets since mid-September," Mr. Trichet said. "But we have to remain very alert. We are still in uncharted waters."

Monthly figures from the Paris-based OECD, aimed at providing early signals of economic turning points, supported the cautiously optimistic stance. The results point to a continuing sharp slowdown across developed economies as a whole but suggest a small group of economies may have turned the corner and are headed for a recovery.

Leading indicators for France and Italy, for instance, have risen for three straight months through March, according to revisions to the data for the most recent months, while the leading indicators for the U.K. and China have risen for two consecutive months. Previously, the 30-nation OECD had categorized all four economies as being in a "strong slowdown." It now says each may have reached a "possible trough."

While the indicators offered a glimmer of hope for some economies, they signal that a return to growth is some way off for three of the world's four largest economies, the U.S., Japan and Germany.

Among the large developing economies, China showed the clearest signs of revival, while leading indicators for Brazil, Russia and India continued to fall.

Across the 16-nation euro zone, dismal industrial-production data Monday underscored the severity of the first-quarter slowdown.

Italian industrial output fell 24% in March from a year earlier, while French industrial production fell 16%, their national statistics offices reported. The German statistics office said German steel production plunged 53% in April from a year earlier on slumping orders from the automotive and machinery industries.

U.K. data indicated that major segments of the economy in the country -- which is outside the euro zone -- are on the mend. The British Retail Consortium said same-store retail sales rose 4.6% in April from a year earlier, the largest annual increase in three years. The Royal Institution of Chartered Surveyors' monthly property survey showed its house price balance rose to minus 59.9 in April from a revised minus 72.1 in March -- the strongest level since January 2008. The price balance is calculated by subtracting the percentage of surveyors reporting falling prices from those reporting rises.

The latest euro-zone forecasts point to the area's gross domestic product contracting between 2% and 2.5% in the first quarter from the previous quarter, and by more than 4% from a year earlier, economists say. That would be the bloc's worst performance. The data are due Friday.

The Eurostoxx index has risen more than 30% in the past two months as sentiment surveys have suggested the economy is stabilizing. "There are signs that the worst was in the first quarter," ECB Governing Council member Miguel Ángel Fernández Ordóñez told reporters in Basel.

Among hopeful signs Monday, ECB figures showed that credit rates charged to households and businesses continued to fall in the wake of the ECB's interest-rate cuts. The weighted-average rate on loans of up to €1 million ($1.4 million) to businesses across the bloc fell to 4.03% in March from 4.32% in February, the ECB said.

Businesses world-wide are cutting back severely, which threatens to damp prospects for a quick recovery.

A global survey of nearly 300 financial executives to be released Tuesday by CFO Research Services and credit-card company American Express shows that 40% of respondents expect their economies will return to growth by the first half of next year. However, two-thirds of executives said their companies are reducing capital investments this year, while more than half are cutting headcount, a third are reducing benefits and 29% are cutting salaries and/or bonuses.