Global economy still on recovery path

Some negative data notwithstanding, last week's economic reports mostly show that the global economic recovery remains intact.

The on-going economic recovery is probably best indicated by the continued rise of purchasing managers indices around the world in December. The JPMorgan global all-industry output index rose to 53.4 in December from 51.7 in November, indicating acceleration in global economic growth.

A report from the Organisation for Economic Co-operation and Development last week indicated that the global expansion is likely to be maintained. The OECD's composite leading indicator for its member countries rose to 102.3 in November from 101.4 in October.

Employment data reported on Friday were among the disappointments for the week. The unemployment rate in the euro area rose to 10.0 percent in November, the highest level since August 1998. In the United States, the economy lost 85,000 jobs in December while the unemployment rate stayed at 10.0 percent.

On the other hand, the US employment report did show that the rate of job losses has abated and the trend is clearly improving. November data were even revised to show a gain of 4,000 jobs.

Reports from the Institute for Supply Management last week support the picture of an improving economy. The ISM's PMI rose to 55.9 in December, the highest since April 2006, from 53.6 in November. The non-manufacturing index read 50.1 in December, rising from 48.7 in November and indicating that the services sector is no longer shrinking.

In the euro area, a survey by the European Commission shows that the outlook continues to brighten despite the sluggish recovery so far. The economic sentiment indicator rose to 91.3 in December from 88.8 in November. This suggests that the economy is likely to maintain positive growth after having pulled out of recession in the third quarter with a 0.4 percent expansion.

Even Japan, still facing deflation after two consecutive quarters of growth, is likely to maintain its economic recovery. The coincident index of Japanese business conditions showed a rise to 95.9 in November from 94.3 in October while the leading index rose to 91.2 from 89.4.

So on the whole, last week's reports show that the global economy is continuing its recovery.