Global recession may be coming to an end

The global economy appears to be slowly returning to growth.

Today, Japan's Cabinet Office reported that the country's gross domestic product grew by 0.9 percent in the second quarter, its first quarter of positive growth after four consecutive quarters of decline. The economy had contracted by 3.1 percent in the first quarter.

Reports in the previous few weeks had shown that most of the other major developed economies continued to shrink in the second quarter but the pace of contraction moderated from that in the first quarter.

GDP shrank 0.1 percent in the euro area in the second quarter after contracting by 2.5 percent in the first quarter. Germany, the largest economy in Europe, even managed to expand by 0.3 percent in the first quarter. Although small, this was a sharp turnaround from the previous quarter's 3.5 percent contraction.

In the United States, GDP shrank 0.3 percent in the second quarter after contracting by 1.6 percent in the first quarter.

Apparently, the economies that saw the biggest contraction in prior quarters are now seeing the strongest bounce.


Fortunately, leading indicators show that the major developed economies are likely to continue improving in the coming months.

For example, on 7 August, the Organisation for Economic Co-operation and Development reported that its composite leading indicators for June 2009 showed signs of improvement in the economic outlook of OECD economies, with stronger recovery signs in several economies including Germany and the US.


And on 14 August, a report from the Economic Cycle Research Institute indicated that the US economy is likely to experience a strong recovery. The ECRI's weekly leading index rose to a 47-week high of 123.9 in the week to 7 August from 121.7 the prior week. The index's annualized growth rate jumped to a 26-year high of 13.4 percent from the prior week's 10.4 percent.

So it is looking increasingly likely that the global recession is coming to an end.