Ending Now: The World Recession

Tokyo, Japan, 22 August 2009. A number of indicators are pointing to the fact that the global recession is ending now. If true, this marks a turning point for the world, which has suffered its worst recession since the Great Depression and World War II. It doesn’t mark the end of the Financial Crisis, since many banks default rates and non-performing loans are still rising in number.[br]

Tokyo, Japan, 22 August 2009. A number of indicators are pointing to the fact that the global recession is ending now. If true, this marks a turning point for the world, which has suffered its worst recession since the Great Depression and World War II. It doesn’t mark the end of the Financial Crisis, since many banks default rates and non-performing loans are still rising in number.[br]

According to Harvard Economics Professor Kenneth Rogoff, “the world economy is unquestionably healing and emerging from recession.

After the Federal Reserve’s annual meeting, Fed Chairman Ben Bernanke also signalled – albeit more cautiously – the committee’s view that the recession is ending. “The economic recovery is likely to be relatively slow at first. Unemployment may continue to rise for a while, with only gradual declines likely thereafter. Strains persist in many financial markets across the globe.”

The quick actions that central banks and government took at the end of 2008 and the start of 2009 appear to have had the desired effect. Many – but not all – large banks have been bailed out, keeping the functioning of the financial system going. Interest-rates at or near zero, record low levels in many countries, have kept funding flow, while stimulus packages worth trillions in total have already boosted Asia, and are likely starting to help Europe and America.[br]

There have been surprisingly strong GDP figures posted for many countries in the Q2 2009 period, with China’s domestic market rampant, and export-dependent economies like South Korea, Taiwan and Singapore also doing surprisingly well. France and Germany also surprised many with positive results, while even Japan has posted modest growth.

In the US three important indicators point upwards. Housing starts have risen for five straight months and are now at last October’s levels, while stock markets continue to post gains, with the S&P also back at October levels, wiping out the worst of the Financial Crisis red ink. And although unemployment continues to rise, new unemployment claims are dropping. In fact, since peaking in April, the four-week moving average of initial jobless claims is down more than 15 per cent. That is the biggest decline in jobless claims in a recession since 1969.

We are clearly not out of the woods yet. The UK posted worse than GDP expected results. Although housing is turning around its financial sector is still working through its problems. And oil above $70 could threaten the global recovery.

But having been starting at the end of the world, or at least the end of the financial system that supports us all, merely months ago, it is reassuring that we are back in normal boom-and-bust territory. We hope.

Dwayne Ramakrishnan, EconomyWatch.com