PARIS, Aug 22: The economic gap is widening across the Atlantic as the United States is showing tangible signs of recovery and the eurozone is slipping into recession, sinking the euro in its wake.

In the US, the closely watched Conference Board’s index of leading economic indicators, a barometer of activity expected in the coming six to nine months, showed on Thursday a rise of 0.4 per cent in July, compared with 0.3 per cent in June.

The July increase, in line with analyst forecasts, was the best reading in more than two years and the fourth straight monthly improvement.

“America’s long-awaited economic recovery is taken as a given these days. At least, that’s what the stock and bond markets are telling us (again),” said Stephen Roach, chief economist at Morgan Stanley.

In comparison with their March levels, the world’s stock markets have gained an average 28 per cent in value, according to data published on Friday by Merrill Lynch.

But the Japanese economy, undermined by its financial sector and in the doldrums for more than a decade, now seems to be waking up.

A key barometer of economic activity in Japan rose in June from a month earlier with the core services sector gaining a seasonally adjusted 1.2 per cent, the trade ministry said on Friday.

The all-industries index, which monitors growth in a range of agricultural, manufacturing and service industries, rose 0.9 per cent month-on-month in June, marking the second consecutive monthly rise, the Japanese Ministry of Economy, Trade and Industry said.

But “while the United States, or even Japan, have shown a distinct improvement in their activity, France and the eurozone are clearly still not in such a favourable scenario,” said Nicolas Claquin, economist at the French bank Credit Commercial de France (CCF).

In fact, the eurozone seems to be mired down.

Three members — Germany, the biggest economy, Italy and the Netherlands — are in recession and France — the second-biggest — is just skirting it.

This week France reported a second-quarter contraction of 0.3 per cent, provisionally pushing the entire 12-nation eurozone economy into a 0.1-per cent contraction, the European Union statistics office Eurostat said.

Two main factors are stifling eurozone growth: a decline in consumer demand, particularly in France, and most of all a steep drop in exports.

Exports have been hit hard by the euro’s strength against the dollar in recent months, making them more expensive compared with rival US goods and services, and especially Asian exports.

Against this backdrop, the widening growth chasm between the US and the eurozone could lead to a softer euro and higher exports, eventually helping turn the lights on in Europe.

“The worst could be over due to the signs of recovery in the United States, of the euro’s moderation and some movement that has already been seen in France and in Europe in (economic confidence) surveys or June figures,” said Anne Beaudu, economist at Credit Agricole.

In Germany, a few signs, like the ZEW confidence index this week, have hinted at an emerging economic recovery.

The euro, which some had believed was firmly supported above $1.1, was weaker this week, pressured by the latest US and eurozone figures.

It slipped below $1.09 on Friday to a new four-month low.—AFP