Air travel recovery hints that Europe could be back on the move

On Wednesday, ArcelorMittal, the world's biggest steelmaker, reported unexpectedly strong quarterly profits US$1.7 billion (1.31 billion euros), more than reversing a year-earlier loss of US$792 million.

Sales in the quarter jumped 43 percent as demand for steel — a basic component in consumer goods from cars to fridges — roared back into life, helped especially by China.

French auto group PSA Peugeot Citroen said it too returned to profit in the first half of 2010, with earnings of 680 million euros after a loss of 962 million euros in the same period last year.

Shares in both AreclorMittal and PSA fell, partly on disappointment and partly because of some clouds ahead, but the underlying signal is matched by other signs.

PSA's performance reflects the strong recovery in the auto industry generally. Renault has reported a 21.6-percent leap in first-half sales.

German carmakers are riding a wave, reporting strong demand from Asia, with Daimler announcing plans to ramp up output alongside a strong profit forecast for 2010. Audi, for example, says it is straining to meet demand in China.

There are other important signs from deep within European industry.

The German machine-tool industry, a supplier to industry around the world, expects output to rise by 3.0 percent this year.

And the biggest supplier of ball bearings, a vital component of machinery everywhere, SKF of Sweden which also makes sealants, reported a big increase in profits in the second quarter.

Demand for trucks is a leading indicator of activity in every sector of the economy, and two of the main European truck makers, Scania and Volvo trucks in Sweden, have reported unexpectedly strong second-quarter results.

Last week, figures showed German business confidence jumped sharply in July to 106.2 points from 101.8 points in June.

“Firms are reporting significantly more favourable business conditions,” the Munich-based Ifo institute, which compiled the data, said.

The Markit purchasing managers' index for the eurozone, another important leading indicator, accelerated for the first time for three months in July, although analysts warned that activity might moderate in coming months.

Britain, fresh from a record-long recession, is also doing much better, with the economy growing 1.1 percent in the second quarter.

“This is an absolutely incredible growth number — way above all expectations and the best performance since the first quarter of 2006,” IHS Global Insight economist Howard Archer said of last week's data.

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