LONDON: Britain's battered economy is witnessing "green shoots" of recovery after a deep recession, but they could remain fragile for some time as the jobless toll continues to rise, analysts warn.

Major economies including Britain, the eurozone, Japan and the United States were dragged into recession last year as a result of the global financial crisis and the credit crunch, leaving many people facing a bleak winter.

But as the summer warms up shopkeepers and businessmen are reporting signs that customers have money in their pockets again, while banks are lending more, helping to steer the housing market out of a steep slump.

Mexican food chain Chilango has bucked the downturn, launching its first restaurant in Islington, north London, in 2007 amid the eruption of the global financial crisis. It opened a second outlet on Fleet Street last October.

"My gut feeling is that the recession's not going to get worse than where we are now -- it may stay at the point we are at -- but it will only get better from this point," Chilango founder Eric Partaker told AFP.

His experience is in line with recent news suggesting that the British economy could be awaking from its slumber.

The country's gross domestic product (GDP) -- the total value of goods and services produced in the economy -- shrank in the third and fourth quarters of 2008, and contracted a further 1.9 percent in the first three months of 2009.

But a leading think tank has predicted that the worst is now over for the embattled economy -- adding that it grew in size over the past two months.

On Thursday, the National Institute of Economic and Social Research (NIESR) said British GDP grew by 0.2 percent in April, followed by 0.1-percent expansion in May, as a fragile recovery appeared to take hold.

The cautious air of hope is echoed on the high street, where British retail sales increased 0.9 percent in April from March.

In further encouraging news this week, British manufactured output rose by 0.2 percent in April from March, marking the second monthly gain in a row, official data showed.

The positive data is reflected on the factory floor: Rex Baynton, managing director of Stephens Gaskets in Oldbury in England's West Midlands region, said recent weeks had brought welcome relief.

"Things have changed quite remarkably, positively, just in the last two weeks really. Clearly our customers, who are the end assemblers, their demand is clearly growing," he told the BBC.

Elsewhere, home loan providers Halifax and Nationwide have both reported rising house prices during May, and on Thursday it emerged that there was a 16-percent jump in mortgage lending to Britons buying a new home in April.

Despite this week's positive news, experts argue that the British economy is not out of the woods.

"Data over the past couple of weeks has not only exceeded expectations, but there are even indications that the UK recession may be over," said Dresdner Kleinwort analyst Peter Dixon.

"But it would be prudent to reserve judgement... a recovery in final demand could be some months away, whilst a recovery in employment could be further ahead still."

Howard Wheeldon, senior strategist at BGC Partners added: "The reality is surely... recession in the UK certainly isn't over yet even if GDP figures later this month show that the decline appears to be bottoming out.

"Whilst it is probably right to claim evidence of the beginnings of a recovery of sorts we should not get carried away. Certainly we are not yet talking of real and lasting revival, we are not yet talking a resumption of growth and we are not yet able to dare mention the word sustainable."

Britain's unemployment rate hit 7.1 percent in the three months to March as the number of people claiming jobless benefits jumped to 2.22 million.

Back in April, British finance minister Alistair Darling came under fire from newspapers, analysts and political opponents for what they claimed were overly optimistic forecasts for the economy.

On Friday he tempered his comments, warning in an interview with the Financial Times that resurgent oil prices had the potential to be a huge problem as far as the recovery is concerned.

Darling and embattled Prime Minister Gordon Brown hope that economic recovery comes sooner rather than later -- not least to help them avoid being ousted in a general election that must be held by mid-2010.