IF IT wasn't for all the anti-globalisation conspiracy theorists, we'd smell a rat. On the very day that the G20 summit issued its communiqué after weeks of wrangling and verbal polishing, world stock markets soared, as if on cue.
Did 'G20' save the world? Did central banks stride in as aggressive buyers under secret orders to turn around global confidence and save capitalism? There is, after all, a colossal cash mountain on the sidelines. The broadest measure of US liquid a
ssets hit a record $13.9 trillion (£9.38 trillion) just two weeks ago, up 11% or $1.4 trillion from a year ago.
It is tempting to think there was some co-ordinated "invisible hand" at work. And it would not be the first time that stock markets have been turned on the much rumoured actions of a cabal of institutions. Real life, however, is seldom so simple. And stock markets have been rallying since the dark days of February. But the past week could well go down as a critical turning point in this deep and fearful recession.
It is not the week that saw the start of recovery. But it looks like the one when the world stepped back from its worst fears of Armageddon.
From an easing in the rate of attrition in US car sales through a pick-up in UK mortgage lending to better than expected manufacturing data in continental Europe: there was enough to assemble a plausible argument for the view that the worst point of the global recession may now be behind us.
The news flow over the past week saw a marked change from the devastatingly grim to the merely bad. And it tells us much about the miserable state of business and financial confidence that markets rallied so strongly not on good news, but on figures showing that the continuing downward trend was less bad than feared.
The G20 outcome did achieve a remarkable degree of unanimity. It was reassuring to see so many world leaders at least on speaking terms and President Barack Obama showing a much changed face of America to the world.
But G20 can hardly take all the credit for the stock market bounce. Many of these pointers related to survey data for February and March, so it would be wrong for the razzmatazz surrounding the G20 to be cited as the proximate cause of the marked change in the trend of news.
Indeed, markets may be vulnerable to profit taking and a relapse once questions start being asked about how much new money is involved exactly and from out of whose coffers it will come. Gordon Brown put the headline total at $1.1 trillion as he closed the summit. The resources being made available to the International Monetary Fund are to be trebled to $750bn. Lending to the world's poorest countries is to be stepped up to $100bn. There is a commitment of an extra $250bn to support trade finance over the next two years.
After allowing for a big contribution from China, might the wherewithal to help fund those lofty numbers eventually come from the very economies already plunged into record debt by the worst recession since the 1930s? Like some borrowed-to-the-hilt aristocrat gambler, Brown has mastered the insouciant toss of the head to the maitre'd: "Just put it on the tab, Forbes!" However, the US Congress might choke over its share of the bill for this latest largesse.
More positively, there is now growing evidence that the first signs of the massive fiscal and monetary stimulus of the past nine months is starting to work through. All told, that is reckoned to come to $5 trillion.
After some of the most precipitous falls seen for decades in exports, manufacturing output, business confidence, order books and sales, an easing in the rate of decline was surely due. Sceptics point out that economic activity is still deteriorating and that the outlook for employment and business growth is set to get worse before it gets any better.
However, news that the decline in many areas is not as bad as feared should of itself help to rally confidence and stave off the worst of outcomes: a downward spiral in which fears of falling prices become self-fulfilling and consumers keep postponing purchases, turning recession into full-blown Depression.
The list of 'change in the wind' pointers is geographically broad, ranged across different industry sectors, and growing. Among the highlights are:
• US car sales jumped nearly 25% last month from February, beating the typical rise and underpinning hopes of a turnaround in the American car market. Separate data showed German auto sales soared last month to their highest level since 1992 thanks to a powerful boost from the government's new car-scrapping bonus.
• Data last week showed US factory output in March shrank at a slower pace than February. The index of national factory activity compiled by the Institute of Supply Management rose from 35.8 in February to 36.3 in March.
• New orders also looked relatively strong, rising to their highest level since August of last year.
• The US Commerce Department reported that February construction activity dropped by 0.9% but notably less sharply than the 1.5% decline widely expected.
• In the US housing market, the National Association of Realtors reported the seasonally adjusted index of pending house sales rose 2.1% in February. Sales of existing houses rose 5.1%, the largest increase in nearly six years.
• In Europe the rate of decline in manufacturing activity has eased. The Eurozone purchasing managers' index was buoyed by Germany and France showing tentative signs of stabilisation.
• Here in the UK, pointers released last week showed manufacturing activity falling at a slower rate. Mortgage lending picked up 18% in March, albeit from a low base, and the Nationwide house price index showed a rise in prices.
• Then on Friday came news that the purchasing managers' survey for the services sector rose for a fourth successive month in March, and by more than expected to be at a six-month high. This added to hopes that the rate of economic decline is starting to moderate. However, set against this is the certainty of further sharp increases to come in unemployment.
In America, the unemployment rate jumped to 8.5% in March, the highest since late 1983, as a wide swath of employers eliminated 663,000 jobs. It is fresh evidence of the toll the recession has inflicted, and economists say there's no relief in sight. This road to recovery is going to be long.
The full article contains 1120 words and appears in Scotland On Sunday newspaper.
