World economy lurches towards recovery
World leaders have been upbeat but equally cautious about declaring victory in the epic battle against recession. Economies out of recession | More on Financial crisis
By Agencies |
LONDON: The world economy lurched toward recovery on Wednesday even as fears lingered on financial markets, brightening the sky for talks between G20 finance ministers in London later this week.
Australia surprised with a jump in growth in the second quarter, US manufacturing expanded, European economies continued their gradual emergence from the worst crisis in decades and company results showed an upturn.
The worst of the financial crisis is "over for the time being," Jean-Claude Juncker, head of the Eurogroup of finance ministers, told reporters as he arrived for a meeting in Brussels.
Finance ministers from the Group of 20, which comprises leading developed and developing nations, will be meeting in London at the weekend to lay the groundwork for a G20 economic summit in the US city of Pittsburgh on September 24-25.
World leaders have been upbeat but equally cautious about declaring victory in the epic battle against recession and have warned that recovery will be slow as they focus on the looming dilemma of how to exit stimulus programmes.
"The global economy is not out of the woods yet by a long stretch," Prime Minister Kevin Rudd said even as data showed Australia's economy growing 0.6 percent in the second quarter -- the best result among developed countries.
His Treasurer Wayne Swan sounded a more upbeat note, calling the result "remarkable" given the fragility of the world economy and saying: "Today's result means we are the fastest growing advanced economy over the past year."
Resource-rich Australia's shipments to China and its government stimulus programme have helped shield it from the worst of the global downturn, with the only blip so far an 0.5 percent contraction in the final quarter of 2008.
In the United States, US President Barack Obama on Tuesday said the growth in US manufacturing in August for the first time in 19 months was "a sign that we are on the path to economic recovery."
But he also warned: "There is no doubt we have a long way to go."
Australia surprised with a jump in growth in the second quarter, US manufacturing expanded, European economies continued their gradual emergence from the worst crisis in decades and company results showed an upturn.
The worst of the financial crisis is "over for the time being," Jean-Claude Juncker, head of the Eurogroup of finance ministers, told reporters as he arrived for a meeting in Brussels.
Finance ministers from the Group of 20, which comprises leading developed and developing nations, will be meeting in London at the weekend to lay the groundwork for a G20 economic summit in the US city of Pittsburgh on September 24-25.
World leaders have been upbeat but equally cautious about declaring victory in the epic battle against recession and have warned that recovery will be slow as they focus on the looming dilemma of how to exit stimulus programmes.
"The global economy is not out of the woods yet by a long stretch," Prime Minister Kevin Rudd said even as data showed Australia's economy growing 0.6 percent in the second quarter -- the best result among developed countries.
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His Treasurer Wayne Swan sounded a more upbeat note, calling the result "remarkable" given the fragility of the world economy and saying: "Today's result means we are the fastest growing advanced economy over the past year."
Resource-rich Australia's shipments to China and its government stimulus programme have helped shield it from the worst of the global downturn, with the only blip so far an 0.5 percent contraction in the final quarter of 2008.
In the United States, US President Barack Obama on Tuesday said the growth in US manufacturing in August for the first time in 19 months was "a sign that we are on the path to economic recovery."
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But he also warned: "There is no doubt we have a long way to go."
Analysts at Dutch bank ING said in a research note to clients: "A stronger US manufacturing sector could help underpin the global recovery, and provide support for commodity prices."
They added however that US "economic activity remains exceedingly weak."
Paul Dales from Capital Economics in London was also optimistic but cautious.
"The good news is that the recovery in the US manufacturing and housing sectors appears to be gathering pace. The bad news is that it is still not creating any extra jobs," Dales said.
"It is worth remembering that the recovery has not even begun in the all-important consumer sector," he said, adding: "Overall, it's shaping up to be another jobless recovery."
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Experts warn major headaches for the world economy still lie ahead as some government stimulus programmes begin to wind down, unemployment rises and concerns linger over the banking sector.In Germany for instance, fears rose on Wednesday of massive job cuts in the giant auto industry as a five-billion-euro (7.1-billion-dollar) government "cash-for-clunkers" programme wound down.
Stock markets have also shrugged off the upbeat economic data, tumbling around the world this week as traders rush to cash in quick profits.
London's benchmark FTSE 100 index was 0.36 percent down in mid-day trading.
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"Compared to last month's optimism, investors seem afraid of fear itself, more than anything else," said Daniel Roy, equities analyst at Newedge brokers. "Across market players, it is generally accepted that a correction is due on equity markets" after strong recent gains, he added.
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Stock market drops in turn prompted traders on Wednesday to buy up the Japanese yen -- seen as a safe-haven investment -- against the dollar and euro. The trend "reflects the nervousness of investors about the sustainability of global economic recovery," Barclays Capital analysts wrote to clients.
Oil prices, which tend to reflect economic recovery hopes, also remained below 70 dollars a barrel on Wednesday amid worries about energy demand.
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