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South Korea’s manufacturers increased production at the fastest pace in four months in June, a sixth consecutive advance, amid signs global demand for the nation’s cars and electronics is picking up.

Factory production rose 5.7 percent from May, when it gained a revised 1.5 percent, the National Statistical Office said today in Gwacheon. That compared with a 2 percent median estimate in a survey of economists. From a year earlier, output fell 1.2 percent, the smallest drop in nine months.

A revival in overseas shipments and consumer spending helped Asia’s fourth-largest economy expand at the fastest pace in almost six years in the second quarter. Optimism about a rebound sent manufacturers’ confidence to a 14-month high and the Kospi share index is up 38 percent this year.

“Exports have been performing relatively well and demand at home helped overall production,” said Go You Sun, an economist at Daewoo Securities Co. in Seoul. “There aren’t strong signs that demand is back, but a gradual pickup is likely.”

Other regions are enjoying a rebound in output as well. Japan’s industrial production increased 2 cash loans in 1 hour.4 percent from May, the fourth monthly increase, capping the biggest quarterly gains since 1953, a government report released yesterday showed.

Samsung Electronics Co.’s quarterly profit rose to the highest in more than two years, exceeding analysts’ estimates, fueled by higher sales of televisions and mobile phones. Hyundai Motor Co., South Korea’s largest automaker, reported record quarterly profit, with net income gaining 48 percent in the second quarter.

Government Forecast

South Korea may expand in the second half of 2009, the government said yesterday, adding that it is set to meet its 2009 economic forecast. The government said on June 25 gross domestic product will shrink 1.5 percent this year, less than an April forecast of a 2 percent contraction.

A leading index of economic indicators, which provides a gauge of future business activity, climbed 6 percent in June from last year, the report showed today. Sales of consumer goods rose 1.8 percent from May, while inventories gained 0.4 percent from May.

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New Zealand’s central bank kept its benchmark interest rate unchanged for a second month and said it may cut borrowing costs further as a rising currency threatens a recovery from the worst recession in three decades.

“The forecast recovery is based on a further easing in financial conditions,” Reserve Bank Governor Alan Bollard said in a statement in Wellington today after leaving the official cash rate at 2.5 percent. “If this easing does not occur, the recovery could be put at risk. In these circumstances we would reassess policy settings.”

New Zealand’s dollar fell the most in three weeks after Bollard said rates may fall further and won’t rise until late next year。The central bank cut borrowing costs by 5.75 percentage points between July 2008 and April to buoy an economy that began contracting in the first quarter of last year.

“We continue to expect the dollar to be strong over the next year, which does reinforce the prospect of the Reserve Bank having to cut the cash rate further,” said Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland. He expects quarter-point cuts in September and October.

New Zealand’s dollar tumbled to 65.01 U.S. cents at 10 a.m. in Wellington from 65.74 cents immediately before the statement. The two-year swap rate, a fixed payment made to receive floating rates, fell to 3.94 percent from 4.07 yesterday.

More to Come

“We expect to see a patchy recovery get under way toward the end of the year, but it will be some time before growth returns to healthy levels,” Bollard said. The cash rate “could still move modestly lower over the coming quarters.”

Bollard said inflation is expected to remain comfortably within the 1 percent-to-3 percent range he targets.

Wholesale interest rates and the currency are higher than the central bank assumed, which “is not helping the sustainability of future growth and brings with it additional risks,” he said.

Finance Minister Bill English said this month the currency was “higher than fundamentals warrant” and may hamper his desire for the nation’s recovery to be based around exports and investment rather than consumption led by borrowing.

Exports fell 5.4 percent in the second quarter from the previous three months, the government reported this week.

“We need to see the Reserve Bank indicate a commitment to lowering the currency,” John Walley, chief executive of the New Zealand Manufacturers & Exporters Association, said this week in an e-mailed statement. He wanted Bollard to cut the cash rate.

Export Threat

Fonterra Cooperative Group Ltd business cards online., the world’s biggest dairy exporter, yesterday reiterated that its payment to New Zealand farmers will be 12 percent lower this year because of falling prices and the currency.

The payment would have been revised lower were it not for “encouraging signs” in some international dairy markets, the Auckland-based company said.

Bollard reiterated he “expects to keep the cash rate at or below the current level through until the latter part of 2010.” By contrast, traders expected 86 basis points of increase within a year, according to a Credit Suisse index. A basis point is 0.01 percentage point.

All 10 economists surveyed last week by Bloomberg News forecast today’s move. All expected the rate will also be unchanged at the next review on Sept. 10.

New Zealand’s economy is probably in its seventh quarter of recession, according to the central bank’s June 11 forecasts. Today’s statement contains no new forecasts.

“Overall economic growth is evolving broadly in line with our forecasts in June” Bollard said. “The outlook remains highly uncertain.”

Housing Market

New Zealand’s exports are heavily weighted to soft commodities such as butter, cheese and wool and haven’t benefited from recent gains in hard commodity prices, he said.

The housing market may lead a recovery after second-quarter home prices rose for the first time since late 2007. There were 40 percent more property sales in June than a year earlier, the Real Estate Institute said on July 9.

Consumers are less pessimistic and business confidence is recovering, recent polls show.

The proportion of consumers who expect the economy will deteriorate over the next year fell to 41 percent in early July, the lowest level since March last year, according to a survey of 1,039 people by Melbourne-based Roy Morgan Research.

Business confidence rose to a 10-month high in July, ANZ National Bank Ltd. said yesterday, citing a survey of 402 companies. Firms were less pessimistic about profits and fewer expected to fire workers over the next year.

The jobless rate rose to a five-year high of 5 percent in the first quarter and may increase to 7.2 percent by mid-2010, the central bank forecast last month.

Winstone Pulp International Ltd. this week said it would close a North Island saw mill and fire 65 workers. Earlier this month, New Zealand Post, the state-owned postal service said it had cut 380 jobs since the start of the year.

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A gauge of U.S. house prices posted its first monthly gain in three years, providing some solace to consumers shaken by rising joblessness.

The S&P/Case-Shiller home-price index rose 0.5 percent in May from the prior month, the first gain since July 2006 and biggest since May of that year, the group said today in New York. A Conference Board report showed consumer confidence this month fell more than forecast.

Stabilization of the worst housing market since the 1930s and a rebound in stocks may bring an end this quarter to the record slump in household wealth. Even so, Americans are likely to boost savings and limit spending as unemployment is projected to top 10 percent by early 2010, restraining any recovery from the deepest recession in five decades.

“The fact that home prices may be finding some semblance of stability is good news that things are not likely to get worse,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Folks are still concerned about their jobs” and “the loss of housing wealth is going to weigh on consumer spending for years to come.”

Stocks fell and Treasury securities rose after the worse- than-projected confidence report. The Standard & Poor’s 500 index closed at 979.62, down 0.3 from the prior day’s eight- month high. The yield on the benchmark 10-year Treasury note fell to 3.68 percent at 4:11 p.m. in New York from 3.72 percent late yesterday.

Less Confidence

The Conference Board’s confidence index dropped to 46.6, a second consecutive decline, following a reading of 49.3 in June, the New York-based research group said. The figure reached a record low of 25.3 in February.

The S&P/Case-Shiller home-price index was down 17.1 percent from May 2008, less than projected and the smallest year-over- year drop in nine months.

Economists forecast the index would drop 17.9 percent from a year earlier, according to the median of 32 projections in a Bloomberg News survey. Estimates ranged from declines of 17.5 percent to 18.3 percent.

Compared with a month earlier, 14 cities showed price gains, led by a 4.1 percent jump in Cleveland and a 1.9 percent increase in Dallas.

The price figures aren’t adjusted for seasonal effects, so economists prefer to focus on year-over-year changes. Adjusted for seasonal changes, the index fell 0.2 percent in May, the smallest monthly decline since February 2007.

Signs of ‘Bottom’

“If you’re looking for a bottom, there’s a lot of good stuff here,” Karl Case, an economics professor at Wellesley College and co-creator of the S&P/Case-Shiller index, said on a Bloomberg Radio interview advance payday loans. “If you’re looking for a real recovery, it’s going to take some time.”

The report buttresses other measures that have shown a deceleration in price declines. The Federal Housing Finance Agency said last week that its purchase-only price index was down 5.6 percent in May from a year earlier, the smallest annual drop in 10 months.

The FHFA index is a national measure that tracks houses bought with mortgages purchased by Fannie Mae or Freddie Mac and excludes many of the foreclosure sales and properties bought with non-conventional mortgages. In addition to being limited to 20 areas, the S&P/Case-Shiller report also includes distressed properties and those bought with non-conventional loans such as jumbo mortgages.

Confidence Breakdown

The Conference Board’s measure of present conditions decreased to 23.4 from 25 the prior month, reflecting deteriorating perceptions on job availability. The gauge of expectations for the next six months fell to 62 from 65.5 as Americans grew more pessimistic about jobs and income prospects.

Today’s figures corroborate other reports. The Reuters/University of Michigan final index of consumer sentiment declined in July for the first time in five months as surging unemployment and stagnant wages shook households.

The economy has lost 6.5 million jobs since the recession began in December 2007, making it the biggest employment slump of any downturn in the last eight decades. Economists surveyed by Bloomberg predict the unemployment rate will exceed 10 percent by the first quarter of next year from 9.5 percent in June, the highest level since 1983.

Declines in home prices and stocks cut household net worth by $13.9 trillion through the first quarter, according to figures from the Federal Reserve. The need to rebuild tattered finances has prompted Americans to limit spending and boost savings.

Slow Recovery

“We are preparing for this recovery to take a while to pick up steam,” Frits van Paasschen, chief executive officer of Starwood Hotels & Resorts Worldwide Inc., said in a conference call with analysts last week. The third-largest U.S. lodging company’s second-quarter earnings beat analysts’ estimates.

Fed Chairman Bernanke said July 22 he cannot “guarantee by any means” that declines in home prices are over “but we have seen a few positive indicators.”

The central bank has established a $1.25 trillion program to purchase securities backed by home loans in an effort to put a floor under the housing market and lower borrowing costs.

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Ford Motor Co. reported a net profit in the second quarter thanks to efforts to reduce its debt. But the company posted another operating loss during the second quarter due to a continued slump in sales.

Still, that loss was much smaller than a year ago and Wall Street’s forecasts.

The company converted much of its debt to equity during the period through an offer to shareholders. Ford reduced its automotive debt by $10.1 billion.

That debt reduction caused Ford to post a one-time gain of $2.8 billion, which allowed the company to report net income of $2.3 billion, or 69 cents a share in the quarter. Ford posted a net loss of $8.7 billion a year ago.

But Ford, the only U.S. automaker not to file for bankruptcy during the second quarter, reported an operating loss of $638 million, or 21 cents a share in the period, excluding special items. That’s an improvement over the 63 cents a share Ford lost on that basis in the year ago period.

Analysts surveyed by earnings tracker Thomson Reuters were predicting an operating loss of 48 cents. Shares of Ford (F, Fortune 500) gained more than 9% in early morning trading following the report.

Ford said that total revenue fell 29% to $27.2 billion, as global vehicle sales volume tumbled 25% in the quarter. But Ford’s revenue also beat forecasts. Analysts were expecting a drop of 36% to $24.8 billion.

CEO Alan Mulally told investors he expected industrywide sales to stay sluggish around the globe for at least the rest of this year.

"Clearly the road ahead remains challenging. The recovery is likely to be more modest than many of us had hoped," he said on a conference call. "Despite the challenges, Ford’s underlying business is getting progressively stronger."

Reduced cash burn and improving market share helping results

The company’s auto operations burned through $1 billion in the period, but that too was better than the $3.7 billion in cash it burned through in the first quarter of the year.

Executives said the company’s cash burn could top $1 billion in the third quarter but that they did not expect to go through more cash in the second half of the year than the company did in this year’s first six months.

Ford said it finished the quarter with about $21 billion in cash on hand following its debt-for-equity swap and decision to tap a $10 billion line of credit in the first quarter.

That cash position allowed the automaker to avoid a government bailout at the same time that the Treasury Department was pumping billions of dollars into rivals General Motors and Chrysler Group to keep those companies alive throughout their bankruptcy reorganizations pay day loans.

Mulally said that he believes the fact that Ford did not need a government bailout was one factor that helped it improve its U.S. market share in the first half of the year. Through the first six months of 2009, Ford accounted for 16.1% of U.S. auto sales, up from 15.5% in the year-earlier period.

"We are getting a very positive response for creating a strong long-term business, which people think about when they buy a car," he said.

Ford, which has been trailing GM and Toyota Motor (TM) in annual U.S. sales for the past few years, has been pulling closer to Toyota recently. In fact, Ford sold more vehicles in the U.S. than Toyota in the second quarter.

The company said it expects to continue gaining market share in Europe this year as well, and that it remains on track to track to achieve or beat all of its 2009 financial targets, including $4 billion in cost cuts this year.

Ford also reiterated that it expected its North American auto operations would break even or make money by 2011 and stop burning through cash by that time.

Analysts impressed by Ford’s performance

Shares of Ford have soared more than 340% in the past five months, prompting speculation that the company will soon sell additional shares as a way to raise cash and further reduce its debt.

When questioned about whether there would be such a stock sale, Mulally would only say that "clearly our plan is to continue to improve our balance sheet as we did in the second quarter."

Prior to the second quarter report, analysts were still forecasting more operating losses for Ford in the third and fourth quarters of this year. Company officials did not give earnings guidance for the third quarter or the full year, but Ford’s chief financial officer seemed to hint that higher production levels in the third and fourth quarters could help boost results.

"Volumes do drive our profits," said Ford CFO Lewis Booth.

Analysts said they were impressed by Ford’s financial performance in the quarter, considering the weak sales.

Merrill Lynch analyst John Murphy said during the conference call that he calculated Ford’s North American plants ran at just a bit above 50% of capacity in the second quarter.

"That’s a horrifically low level, and the losses are pretty good performance in the face of that," he said. 

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Pakistan’s central bank will probably lower its benchmark interest rate for the second time this year to help boost economic growth.

State Bank of Pakistan will cut its discount rate to 12.5 percent from 14 percent, according to six of 13 economists in a Bloomberg News survey. Six expect the rate to be reduced by 1 percentage point, while one predicts a 2 percentage-point cut.

“In view of the economic slowdown, slashing interest rates is inevitable,” said Muzzammil Aslam, senior economist at JS Global Capital Ltd. in Karachi. “If economic activity doesn’t pick up now, it will be difficult for the government to meet its macro targets for this year.”

The Pakistan Peoples Party-led government is betting lower interest rates will revive the confidence of investors, who have shied away from the country because of poor security, militancy in the northwest region and a crumbling economy. The South Asian nation was forced to seek a $7.6 billion bailout from the International Monetary Fund in November and may require an additional $4 billion from the Washington-based lender.

Governor Salim Raza is due to release the central bank’s quarterly monetary policy statement on August 15 in Karachi, after the announcement was today delayed from the previously scheduled date of July 25. Raza in April cut the benchmark rate one percentage point to 14 percent from a decade high.

Slowing Inflation

Policy makers last raised borrowing costs by 2 percentage points on Nov. 12, the fourth increase in 2008, as part of conditions for the IMF loan and to curb inflation that reached a 30-year high.

Consumer prices rose 13.13 percent in June from a year earlier, the slowest pace in 16 months. Easing inflation gives the central bank room to cut interest rates, Aslam said.

South Asia’s second-largest economy was forced to turn to the IMF for a rescue package in November to avoid defaulting on its debt, after the country’s foreign-exchange reserves shrunk 75 percent in a year to $3 life insurance.5 billion and the current-account deficit widened to a record.

“The twin deficits of the current account and budget are under control so there is no reason the central bank shouldn’t reduce interest rates,” said Asif Ali Qureshi, head of research at Invisor Securities Ltd. in Karachi. “Still, lowering rates may not trigger economic activity as investors are concerned about political instability and governance.”

Terrorist Attacks

Pakistan’s economy has been deteriorating over the past two years as rivalry between President Asif Ali Zardari and Nawaz Sharif, the leader of the biggest opposition party, over presidential powers have prevented the government from tackling slowing growth and worsening security. The global recession has eroded exports and investment and Taliban insurgents have launched terrorist attacks in response to an intensified military campaign against extremists.

The $146 billion economy may expand as little as 0.8 percent in the fiscal year to June 2010, according to HSBC Holdings Plc, the weakest pace since 1952. The government estimates growth of 3.3 percent.

The central bank’s key interest rate may reach 10 percent by the end of this fiscal year, according to Mustafa Pasha, an economist at BMA Capital Management Ltd. in Karachi.

“Continued inflationary pressures, a weakening rupee and IMF pressure is likely to keep the central bank conservative with regards to monetary easing,” he said.

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The Philippines will focus on smaller projects that can be implemented quickly to bolster economic growth after state spending fell short of target in the first half, Budget Secretary Rolando Andaya said.

“The game plan for the remainder of the year will be small, fast-gestating projects that can be completed in three months, like school buildings, farm-to-market roads,” Andaya said in an interview late yesterday. “We may be able to hit our target” for the full year, he said.

The government plans to boost spending by 17 percent to 1.489 trillion pesos ($31 billion) this year as it tries to revive an economy growing at the slowest pace since the 1998 Asian financial crisis. President Gloria Arroyo is set to incur a record budget deficit of 250 billion pesos as outlays increase while revenue from taxes falters.

Spending in the first six months was 699.1 billion pesos, 5 percent lower than target and 47 percent of the full-year budget, government data show. That helped the budget shortfall stay below a 155 billion-peso target, totaling 153.4 billion pesos in the first half of the year, even as revenue missed estimates by 6 percent fast cash payday loans.

“Under-spending brings with it the risk of economic recovery being hampered by the lack of timely injection of stimulus,” Vishnu Varathan, a regional economist at Forecast Singapore Pte., said in a note yesterday.

Illegal occupants on land where a bridge was to be built and failure of a port project to get design approval may have contributed to the delay of such “big-ticket” projects, Andaya said. Agencies also overstated their spending targets and were approved more funds than what they actually spent, he said.

‘Use it or Lose it’

“We have a policy of use it or lose it, which prompted agencies to go sandbagging to make sure they keep their budget,” Andaya said.

Central bank Governor Amando Tetangco said last month the government must make sure that disbursements for state projects are “are actually used” to support economic growth. The central bank cut its key interest rate to a record low of 4 percent this month.

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White House National Economic Council Director Lawrence Summers chastised some banks that received government aid for not doing enough to reduce foreclosures, while declaring that next year’s economic growth pace is “in doubt.”

“Prudent financial institutions will recognize that the profits they’re enjoying are in part a reflection of the commitment government and the broader society have made to the financial system that has enabled them to enjoy those profits,” Summers said in an interview with Bloomberg News yesterday in Washington.

While Summers, President Barack Obama’s chief economic adviser, didn’t identify any firms, he said the government will disclose names as part of reports on loans and foreclosures. Last week, Goldman Sachs Group Inc. reported record quarterly earnings, while JPMorgan Chase & Co. said it had second-quarter profit of $2.7 billion.

Separately, Summers, 54, said Obama hadn’t consulted him on the potential reappointment of Federal Reserve Chairman Ben S. Bernanke, 55. “The president will consult with whoever he wishes,” Summers said when asked whether he would recuse himself from conversations about the Fed post, for which he’s regarded by Fed watchers as a potential candidate.

Summers said the U.S. economy is “no longer in freefall,” and poised for recovery starting this year. The former Treasury secretary and Harvard University president cited recent increases in exports, and said fiscal-stimulus and foreclosure- relief programs will create a “gathering force” in the coming months.

Income Growth

Even so, income growth may not “resume in the near term,” he told Bloomberg editors and reporters.

“The pace of growth next year, I think, is very much in doubt and difficult to predict,” Summers said. That “will depend crucially on our effectiveness in implementing the programs that have been legislated” and what Congress may do on health care, financial regulation and energy, he said.

The U.S. contraction, the worst in a half-century, probably slowed to a 1.8 percent annual pace in the second quarter from a 5.5 percent rate in the first three months of 2009, economists surveyed by Bloomberg News estimate. Growth will resume in the second half of the year, the economists predicted.

Summers called the banking industry’s mortgage-relief efforts “substantially variable” from company to company.

“I would hope” those firms “consider very carefully the needs of their customers as they formulate their lending policies,” Summers said. “Some institutions I think have been very conscious of the kind of contribution they can make, and others have been much slower to get started.”

Government Aid

He said financial companies have benefited from an “aura of government support,” as well as programs to guarantee debt, backstop commercial-paper issuance and “support weaker financial institutions that were their counterparties compare car insurance.”

In the government’s bailout of American International Group Inc., $105 billion flowed to U.S. states and banks including Goldman Sachs and Bank of America Corp., AIG said in March.

Summers repeated the Obama administration’s call for stricter regulation of financial firms that may be considered “too big to fail.” Those banks and other companies should face higher capital requirements and limits on leverage, which would essentially tax their large and interconnected status, he said.

“We’re very focused on the ‘too big to fail’ problem,” Summers said. He declined to comment on a proposal by Federal Deposit Insurance Corp. Chairman Sheila Bair to slap fees on the biggest financial holding companies because it hasn’t been released yet.

Fed Chairman

Obama has declined to comment on whether he will reappoint Bernanke, who was picked by former President George W. Bush. Bernanke’s four-year term ends Jan. 31. Other potential candidates may include Summers and Janet Yellen, president of the San Francisco Fed bank.

Traders are placing low odds on a Summers Fed. Intrade, a Web site that lets users trade futures contracts for political outcomes, shows a 10 percent chance of Obama appointing him as central bank chief and a 65 percent chance of Bernanke getting a second term.

On health care, Summers said a top Obama priority is to standardize treatment practices and costs for essentially the same illnesses in comparable populations, using Medicare reimbursement policies as the engine.

That approach is modeled after a congressionally created commission that rewards the value of care physicians provide to Medicare recipients rather than the volume of services they deliver.

Medicare Program

Such incentives, Summers said, could “fundamentally change Medicare reimbursements in ways that we can achieve very substantial savings in the health-care system.”

Regional differences in the range of treatments vary today by as much as a two-to-one ratio, he said.

In some cases, studies have show that patients receive better care at two-thirds or half the cost, depending on regional differences, Summers said. “And that’s something that’s going to be very much influenced by reimbursement procedures, which is why the president has the emphasis that he does on Medicare.”

Summers also reiterated Obama’s pledge to sign only a health-care bill that is deficit-neutral over 10 years. The plan will be “paid for in advance,” he said. “I don’t actually understand the argument that it will increase the deficit.”

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General Electric Co. reported sharply lower second-quarter earnings Friday that still beat Wall Street expectations, even as its revenue fell more sharply than forecasts.

Shares of GE (GE, Fortune 500), a component of the Dow Jones industrial average, were down about 5% in early trading.

The company earned $2.9 billion, or 26 cents a share, in the quarter, down 47% from the $5.4 billion, or 54 cents a share it earned in the year-earlier period. Analysts surveyed by earnings tracker Thomson Reuters had forecast earnings of 23 cents a share in the period.

While earnings topped forecasts, overall revenue at the company fell 17% to $39.1 billion from $46.8 billion a year earlier. Analysts had expected revenue to drop to $42.2 billion.

The drops in revenue and earnings were widespread across GE, with its capital finance unit reporting the largest decline — a 29% drop in revenue and an 80% plunge in earnings.

Most of the company’s other units reported double-digit percentage declines in both revenue and earnings. Only its energy infrastructure unit reported a gain in earnings, up 13%, on revenue that was essentially flat.

"In a global economic environment that continues to remain challenging, GE delivered solid second-quarter business results," said GE Chairman and CEO Jeff Immelt in the earnings statement. "We continue to position GE to win in a reset economy."

GE Capital’s woes: The recession has been a drag on much of GE’s range of businesses, which are often seen as a bellweather for the overall global economy.

Consumers have cut spending on big ticket items such as appliances, while businesses trimmed their own capital spending. A drop in advertising revenue across the media industry has hurt results at NBC Universal.

But GE Capital has been most severely hurt by the problems that have dogged U.S. credit and financial markets for the last nine months, causing it to turn to the government for help.

While GE Capital did not receive help from the Treasury’s Troubled Asset Relief Program, or TARP, which was used to bail out banks and automakers, it was one of the largest users of an Federal Deposit Insurance Corp payday loans. program to guarantee its debt. It used those guarantees on more than $43 billion of the debt it issued.

Even with that help, problems at GE Capital caused the company to lose its vaunted AAA corporate debt rating in March, and to cut its dividend to preserve capital.

Still the finance unit is on track to be profitable this year, the company said in its statement, as it has substantially increased its capital ratios, reduced leverage, increased reserves, accelerated long-term debt funding and lowered commercial paper balances.

GE Capital lost money on its real estate loans, although its other lines of business posted a profit.

The unit raised its reserves to $6.6 billion from $5.7 billion in the first quarter to cover anticipated increases in lending losses. But the unit should be able to break even or post a modest profit even in the worst-case economic scenario. "In a difficult environment, we are ahead of schedule on our plan to create a more focused financial services company," said Immelt.

GE Chief Financial Officer Keith Sherin said it was premature to say if GE Capital could see any benefits from current problems at business lender CIT Group (CIT, Fortune 500), which could be forced into bankruptcy after its request for additional federal help was rejected earlier this week.

GE Capital has reported a growth in both business and consumer customers compared to a year ago, even as many other financial firms are having to pull back on lending.

Company officials said they were pleased with the results at GE Capital, given the environment in the financial sector. They said they remain committed to keeping the business part of GE and will fight one proposal from the Obama administration that could conceivably force the company to separate its financial operations from its non-financial units. 

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Japan’s new top currency official said the government would consider stepping into the foreign- exchange market only if abrupt yen moves hurt the economy.

“We’ll make judgments based on whether excessive movements in the currency market will adversely affect the economy,” Rintaro Tamaki, who this week replaced Naoyuki Shinohara as vice finance minister for international affairs, said in a group interview in Tokyo today.

The yen gained against all 16 of the world’s major currencies in the past year, and has surged 3 percent against the dollar this month, making exporters’ products less competitive while lowering import costs. Japan last stepped into the foreign-exchange market to sell yen in 2004.

“Japanese authorities may be saying that excessive yen strength is undesirable, given the present level of the yen,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency trader. “The speed of such a move would likely be a problem for them.”

Tamaki affirmed the view held by the Group of Seven nations that excessive currency moves are undesirable, while adding that the G-7’s stance is “based on the view that the market decides foreign exchange rates.”

The yen rose to 93.64 per dollar at 5:33 p.m. in Tokyo from 93.93 late yesterday in New York.

Never Say Never

“I won’t comment on whether we’ll intervene in the market or not, but if you were to ask me if we’d never intervene, the answer would be no,” Tamaki said.

Tamaki, 55, said Japan will keep supporting the dollar’s status as the world’s reserve currency and there’s no plan to change a policy of investing mainly in U.S. Treasuries, echoing remarks made by Yasutake Tango, the new vice finance minister, in an interview last week cash advance.

Their stance contrasts with that of Masaharu Nakagawa, the shadow finance minister in the opposition Democratic Party of Japan, which leads in polls ahead of elections next month. He said in an interview last week that the nation should consider shifting its foreign reserves away from the dollar.

Japanese investors are the biggest foreign holders of Treasuries after China with $677.2 billion of the securities in May. Japan’s total foreign reserves total $1.02 trillion.

“Japan’s foreign reserves are for the stabilization of the foreign exchange market,” Tamaki said. “Liquidity and safety is the most important factor when we manage the foreign reserves.”

Record Sales

Japan hasn’t entered into the foreign-exchange market since the central bank, at the request of the Finance Ministry, sold a record 14.8 trillion yen ($158 billion) in the first quarter of 2004 in an effort to weaken the currency.

The G-7 said in April that “excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability.”

Tamaki, who served under Shinohara as the head of the ministry’s international affairs department, said the global economy remains in a severe state.

Tamaki worked at the Japanese embassy in Washington from 2002 to 2005. He’s a certified wine adviser and likes classical music and opera.

Some lawmakers at the opposition DPJ grilled Tamaki in parliament on how he handled former Finance Minister Shoichi Nakagawa’s misbehavior at a G-7 press conference in Italy in February. Nakagawa resigned after being criticized for appearing drowsy and slurring his speech at a news conference following the meeting.

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Intel Corp. said Tuesday that its second-quarter sales fell compared to the same quarter a year ago, but that business is picking up fast.

Even as revenue declined from last year, sales figures were better than what analysts had expected. The company reported profits of 18 cents a share, excluding a one-time fine from the European Commission.

Sales fell $1.4 billion to $8.02 billion from $9.47 billion in the second quarter of 2008. Analysts were looking for revenue of $7.28 billion, according to a consensus estimate of analysts polled by Thomson Reuters.

Sales pick up: From the first quarter of 2009, sales surged $879 million as personal computer sales picked up. "Intel’s second-quarter results reflect improving conditions in the PC market segment with our strongest first- to second-quarter growth since 1988 and a clear expectation for a seasonally stronger second half," said Paul Otellini, Intel president and CEO in a written statement.

In particular, sales from Intel’s Atom chip, which are the units that go into smaller netbooks, spiked 65% from the first quarter.

Shares rose 34 cents to close at $16.83 during regular session trade on Tuesday, but surged as much as 8% in after-hours trading.

Intel expects that sales will continue to improve. For the third quarter, the microprocessing giant expects sales of $8.5 billion, plus or minus $400 million, according to the statement. However, the company also says that the overall economic climate could impair its ability to meet its guidance.

The company’s sales will be driven more by consumer demand, like back-to-school shopping, than businesses replacing their computers, according to Otellini. He predicts that businesses will begin to evaluate their technologies toward the end of the summer, but won’t begin their purchases this year.

Intel’s dependence on the consumer concerned one analyst. "Over the past 5 months, oil prices have doubled and if oil prices continue to be where they are today, I think Intel may miss the guidance because the consumer is going to hit the breaks on buying new PCs," said Trip Chowdhry, senior analyst with Global Equities Research.

Antitrust charge hurts profits: In May, European regulators charged Intel with a record fine of $1.45 billion for violating antitrust laws by unfairly paying computer makers to delay or even cancel products that contained chips made by AMD, Intel’s primary rival. Intel disagrees with the ruling., Advanced Micro Devices (AMD, Fortune 500) will report its second quarter results in one week.

Taking into account the one-time charge, the Santa Clara, Calif.-based company’s net income was $1 billion, or 18 cents per share, for the three months ended June 30, compared with net income of $1.6 billion, or 28 cents per share, for the same quarter one year ago online health insurance.

Intel easily beat analyst forecasts. A consensus estimate of analysts polled by Thomson Reuters, which typically excludes one-time charges, had forecast a profit of 8 cents per share.

Without adjusting for the one-time charge from European regulators, Intel posted a loss of $398 million, or 7 cents per share.

A good sign for tech: Intel (INTC, Fortune 500) is something of a bellwether for the tech sector. Investors watch its results as an indicator of spending on personal computers and servers. Intel makes the chips that power PC, and when manufacturers anticipate more consumer demand, they increase their purchasing with Intel.

"While the global economic environment is still recovering, our customers signaled increased confidence for a seasonal second half with their ordering patterns," said Otellini in the conference call after the report was released.

Consumers and businesses have been looking to get the extra mile out of their computers — and put off buying a new one — as they try to save money in the recession.

Demand in Asia was the quickest to recover. "Globally, we saw strength in Asia-Pacific, particularly China, where their stimulus programs continue to generate meaningful growth in their PC market," said Otellini on the conference call. "The U.S. also had a strong quarter while Europe’s recovery lags that of the U.S. and China."

One of the contributing factors to a recovery in demand was the decline in inventories, which fell $240 million in the second quarter. "The supply chain began refilling inventory positions that had been depleted over previous quarters," said Stacy Smith, CFO, on the conference call.

Reaching outside the PC market: Sluggish PC sales have stung Intel, and investors are waiting to see whether a rebound in PC sales will be enough to revive Intel.

Intel and Advanced Micro Devices have the market cornered for the chips that go into standard personal computers, while Samsung and Texas Instruments (TXN, Fortune 500) have most of the market share for mobile-phone processors. At the end of June, however, Intel started working its way into the cell phone business by announcing a deal with the number-one cell phone maker, Nokia (NOK).

At the time of the announcement, Nokia and Intel would not provide any product details other than saying that they would collaborate to developer a new line of "mobile computing devices."

Intel is the first of three major technology companies to report its second-quarter financial performance this week: Google (GOOG, Fortune 500) and IBM (IBM, Fortune 500) are both set to report on Thursday after the bell.  

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