Finding the 'Green Shoots' of recovery

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PARIS, March 29 (AFP): Trillions of dollars lost, millions of jobs gone and more bad news to come but the 'Green Shoots' of recovery may just be showing in the wreckage of the worst global slump since the 1930s Great Depression, analysts say.
Recent data, especially in the United States, the epicentre of the storm, suggest that while things are very bad, they are not getting worse-and that has been enough for beaten down stock markets to bounce strongly.
Having plunged to 12-year lows, the Dow Jones Industrial Average closed Friday at 7776.18 points, up some 20 per cent from the trough reached on March 9 when it fell to 6,546.89 points.
Markets have run ahead before on hopes that the worst is over only for sentiment to sour on the next batch of economic figures, leaving investors badly burned and nursing fresh losses.
This time, however, some analysts say it may be different, that the economy is touching bottom and that the markets-which anticipate the economy's direction 12-18 months ahead - - could be right.
The slump began in mid-2007 with the collapse of the housing market in the United States, the world's biggest economy, and for most analysts that is where the answer lies.
US house prices collapsed in the past 18 months as mounting defaults on subprime, higher risk mortgages pulled down the whole financial house of cards built around them, sparking the global crisis.
But US housing starts and permits staged a surprise jump in February from 50-year lows, easily beating forecasts, while President Barack Obama, noting "glimmers of hope," has pointed to cheaper home finance as a positive.
If the US housing market is stabilising-and analysts were reluctant to give the all clear just yet-then everything else begins to fall into place. More confident home owners would boost consumption, helping both US manufacturing and export-driven economies such as China, Japan and Germany that have suffered from the collapse of their main, US market, Maccario said.
As demand feeds through the system, it would have a multiplier effect, and with employment increasing, the banks may feel more confident about lending again, easing the credit crunch sparked by the US home loan market debacle.
China, significantly, claimed Thursday that its own economic recovery was imminent, citing the effectiveness of its own stimulus efforts.
But what to make of all the continuing very bad economic data? On Friday alone, headlines included the British economy shrinking in the fourth quarter at its fastest pace since 1980, European industrial orders tumbling and bailed out German lender Commerzbank posting a 6.6 billion euros loss for 2008.
Gilles Moec, economist at Bank of America/Merrill Lynch, agreed there had been some improvement in mood but added: "What I want to see is a translation from mood to actual decision."
The most important sign would be a recovery in industrial orders, he said, speaking of the European data Friday.
"That's the kind of indicator that would tell us, 'Okay, now industry is turning around, there's more demand," Moec said, adding that "if we were to see some improvement in orders that would be a clear sign."
Among the data driving recent stock gains were US durable goods order which unexpectedly rose for the first time in February after six months of declines.
The 3.4 per cent rise from January was the biggest increase since December 2007 and trumped forecasts for a 2.4 per cent decline.
"This adds to a growing list of economic indicators suggesting that the rate of decline in the economy may be slowing," Frederic Dickson, chief market strategist at DA Davidson & Co, said of the US data.