Even the professionally gloomy International Monetary Fund now admits there’s a recovery on around the world: hesitant, uneven, but happening.
The Fund’s statement came after the G-20 Finance Ministers meeting in Scotland at the weekend, when it was agreed that ending stimulus packages too so was still a major danger to global economic health.
On other ideas, such as a tax on bank transactions, paying for climate change and some of international scrutiny of each other’s economic policies, not much in the way of agreement and more talks.
"Economic and financial conditions have improved following our coordinated response to the crisis. However, the recovery is uneven and remains dependent on policy support, and high unemployment is a major concern," the G20 statement started.
"To restore the global economy and financial system to health, we agreed to maintain support for the recovery until it is assured."
But that was about it; everything else in the statement was broad and vague.
You’d be entitled to wonder why they met at all.
But this in itself is a good sign about how far the economy has rebounded from when G-20 meetings were held earlier in the year.
When the IMF, which has made itself into the global gloom master, now sees some sunshine, then that should be seen as a good sign.
The IMF said in its statement that ”An overarching risk is that the recovery stalls" owing to early exits from record-low interest rates and massive state cash injections.
"Premature exit from accommodative monetary and fiscal policies could undermine the nascent rebound, as the policy-induced rebound could be mistaken for a strong and durable recovery.
The IMF said that while financial markets were recovering from the crisis, weakness persisted across the banking system — causing the Fund to predict only a "gradual" recovery from the worst downturn since the 1930s.
"Financial strains could also re-emerge if the recovery falters and efforts to restore health to bank balance sheets are not forcefully implemented.
"Hence, it would be important for G20 countries to maintain policy stimulus until there are clear signs of a durable recovery," the IMF added.
That was the message from some of the world’s major central banks in the past week (with the exception of the Reserve Bank of Australia).
The central banks from Australia, to the US, to Europe and New Zealand gave upbeat, but in some cases, very restrained appreciations of their economies and the world.
But on the whole the news was good and the outbreak of volatility towards the end of October had vanished by the end of the week, even though America’s unemployment news for October was mixed (the rate up to a 26 year high of 10.2%), 190,000 jobs lost, but signs of more part time employment.
A bigger worry though was another weak month In September for consumer credit: down for the eighth straight month, the longest decline on record.
Coupled with indifferent same store retail sales last month for some major chains, and expectations of little better when these major retailers report next week (except for Wal-Mart, which may surprise), the outlook for consumption in the US remains very, very weak.
US consumer borrowing fell more than economists predicted, declining by $14.8 billion, or 7.2% at an annual rate, to $2.46 trillion, according to a Federal Reserve report released today in Washington.
Credit dropped by $9.86 billion in August, less than previously estimated. The consecutive declines were the most since records began in 1943.
Consumer spending in September declined for the first time in five months, according to Commerce Department statistics released October 30.
Jobs losses, stagnant incomes and the expiration of stimulus programs may restrain spending
A labor market that kept losing jobs in October threatens to limit consumer spending, which accounts for about 70% of the world’s largest economy. More than 100 banks have failed this year, and lenders are requiring tougher conditions for the credit they extend to consumers and businesses.
The Fed left interest rates steady and made it clear to markets they could not be going up soon, especially with the economy still sluggish, inflation low and inflationary expectations weak.
The European Central Bank and the Bank of England also left rates unchanged and did nothing, except the Bank of England, like the Fed, changed one of its emergency measures.
The Bank of England – extended its Quantitative Easing by 25 billion pounds and the ECB announced that December would be the last of its offers for emergency one-year liquidity.
The Bank of Japan said it saw the economy on the improve and said it would be withdrawing one of its emergency funding measures.
And the country’s Cabinet Office on Friday said that data analyzed in the Indexes of Business Conditions from September may be signal "a possible turning point" for the economy.
The Index measures activity in areas of the economy such as industrial production, power consumption and job offers, and in September, almost all posted small rises.
On Friday, the Organisation for Economic Co-Operation and Development said recovery signs were strengthening with indicators up strongly ahead in China, Britain, France and Italy.
"A recovery is clearly visible in the United States, Japan and all other OECD economies and major non-OECD economies."
The OECD s
