Saturday, July 11, 2009

The Recession Has Begun to Recede

Economic recovery has begun

I wrote in April that we need to be optimistic about a recovery in the world economy in 2009, and that there are likely to be concrete signs as early as July. At the time this statement appeared to be at odds with what many leading experts including senior government officials, economists and CEOs were saying (see details here).

How has the economy been faring since then, and what's the latest prognosis? The Conference Board's Leading Economic Index showed a rise of 1.2% in May - the largest in many years. This and other bright signs prompted Business Week to state on June 18th that the worst is over in the economy.

Perhaps most tellingly, the IMF - hardly known for taking an overly sanguine view on matters economic - declared on July 8th that "the world economy has begun to pull out of the recession".

Of course, the optimism needs to be tempered. There are still many indicators that are in the red. Large tracts of the world's leading economies remain steeped in weakness. The reverberations from the financial crisis and resulting credit crunch are yet to work themselves out fully, although they have gone past their trough. Unemployment remains high in the US and other Western economies. The IMF itself has released mixed figures for its growth prognosis over the next few quarters. Uber-Guru Warren Buffet remains skeptical about recovery anytime soon.

None of these points however can detract from the assertion, backed by the factors I had listed and now supported by the Conference Board and the IMFs' findings, that the recession has begun to blow over. What the observations in the foregoing paragraph do mean is that the slope of recovery is likely to be excruciatingly slow.

It thus appears safe to state that the world economy has definitively begun it's journey out of the quagmire of recession.

Update, July 19th 2009: Newsweek magazine, citing expert sources, has on July 14th declared that The Recession is Over.