The downturn has taken an even bigger toll on economic activity in Europe than in the US, but on Thursday two nations at the Continent's core – Germany and France – reported positive growth of 0.3 percent for the year’s second quarter. Greece and Portugal also showed rising gross domestic product, while the negative numbers in Italy and Britain were much less severe than in the first quarter.
It's hardly a blockbuster performance, but economists generally don't expect hard-hit Europe to show a strong recovery until the rest of the world does. The world's largest economy, the United States, is at best beginning to rebound, suggesting that important momentum is coming from emerging-market economies.
"It certainly looks as though this global recovery has gotten a lift without US leadership," says Ed Yardeni, an economist and investment strategist at Yardeni Research in Great Neck, N.Y. "The emerging economies are leading the way here," he says, and "the old-world countries are following."
He believes the global recession is over, in a shift foreshadowed this spring by rising prices for oil and some other commodities. He expects the global recovery to be slow, and he's not alone in that forecast.
The International Monetary Fund (IMF) last month revised its forecast, saying that the world was beginning to pull out of a recession "unprecedented" since the 1930s, but that "the recovery is expected to be sluggish."
Still, the outlook has become more optimistic. The IMF now sees the world economy growing by 2.5 percent next year – cooler than in some recent years, but better than the IMF's April forecast of 1.9 percent growth.
Exports, including to emerging markets such as China, helped France and Germany turn in surprisingly strong numbers for the second quarter. The shift was also driven by consumer and government spending.
The bottom line is that Europe, after declining at twice the pace of America over the past year, may be turning a corner. But the strength in the global economy now resides in nations that Mr. Yardeni calls the "new world," from China to commodity-rich countries such as Australia.
In fact, the IMF's latest forecast calls for the European Union economies to shrink slightly next year (by 0.1 percent), while economies roar ahead in China (8.5 percent growth), India (6.5 percent), and even sub-Saharan Africa (4.1 percent).
One challenge in Europe remains weak banks, which by some estimates still have lots of bad loans on their books. But at least forecasters have shifted into “upward revision” mode on both Europe and the world. Economists at Merrill Lynch recently boosted their forecast for Europe and said unemployment there should top out at about 10.8 percent early next year. They are also more optimistic than the IMF about prospects for the rest of the world.