German investors grow hopeful

By Todd Eastham

WASHINGTON (Reuters) - Investors in Germany signalled recession may be nearing its low point, while in the United States, optimism from a surge in housing construction was dampened by a downward spike in industrial production.

In Germany, analyst and investor sentiment rose in June to its highest level since May 2006, a survey from the Mannheim-based ZEW economic think tank showed.

"We are nearing (the lowest point in the recession)," said ZEW economist Peter Westerheide. "It all points to an improvement in economic growth. We might still see negative growth digits (in the fourth quarter) but it will be an improvement compared to what we have seen in the past."

Data from the U.S. housing market, where the global financial crisis was born, showed construction of new homes rebounded in May.

But analysts said the figures, paired with news of a larger-than-expected drop in U.S. industrial output, had yet to signal conclusively that any recovery was on the way.

Investors are seeking any sign that the worst of the global recession may be over, despite appeals for caution from officials who fear that markets will surge, only to dive again if the real economy fails to revive.

The ZEW survey in Germany, Europe's dominant economy, found stronger optimism than expected, although that optimism has yet to filter into the real world, where companies are struggling and workers are losing their jobs.

"The survey gives the impression that we could be looking at normal economic activity again by the end of the year. We do not see things this way," said Rainer Sartoris, an economist at HSBC Trinkaus. "Survey participants are somewhat removed from the real situation, which is still very bad."