x Abu Dhabi, UAEMonday 24 July 2017

Signs that the global economy is recovering

After a lot of bad news, there are some reasons for optimism in many parts of the world.

From the long-running worldwide financial crisis to the recent showdown over the US government’s debt ceiling, global economics have offered little in the way of optimism for several years. But a more careful read of underlying trends offers some cautious cause for confidence.

Economic recovery is well underway in many parts of the world, especially in its larger economies. Reports of unexpectedly higher profits made by two global giants, meanwhile, also indicate a growing sense of sustained rehabilitation after years of stagnation.

Take Alcoa, the third largest producer of aluminium in the world. The company reported higher revenues in the third quarter of this year despite low metal prices. Growth in demand for aluminium is a result of improvements in the global markets, particularly in Europe and China. This is supported by the bullish outlook of the UAE’s own aluminium industry. Higher demand for the metal is often a positive indicator of recovery and is usually driven by growth in industries such as construction, car manufacturing, packaging and aerospace.

Profits reported by General Electric also offer encouraging signs. The US industrial giant’s most recent results showed modest earnings but its profits also exceeded Wall Street expectations. The company, now heavily involved in infrastructure building, does most of its business outside America. Orders were up 19 per cent globally.

While these two giants are based in the US, their performances are decent barometers of more general economic health and well-being.

A similar trend has been reported in the world’s second largest economy, China, where government spending boosted the economy by 7.8 per cent during this latest quarter. The success of China’s leaders in steering the economy away from a much feared hard landing prompts hopes the country will maintain its healthy appetite for commodities and energy supplies.

Almost all the other 10 largest economies in the world showed equivalent data. Japan and Brazil expect higher growth this coming year.

In India, a pick up in economic results has been noticeable since August.

All those factors point to important improvements in the underlying health of the global economy, improvements that may well deliver sustained, if slow, recovery after years in the doldrums.