Has the recession bottomed?

Yesterday's stellar new home sales figures, a whopping 11% month on month increase, took everyone by surprise, and was further emboldened by the Case/Shiller Home Price Index which, for the first time since 2006, showed an actual gain in prices, adding further weight to the view that a recovery is really taking hold. This comes on the back of a series of more encouraging news on the global economic front such as continued deceleration in U.S. jobless claims, robust GDP figures in China and better than expected earnings figures for the majority of the companies that figure in the DJ Stoxx 600. The positive momentum is captured by the equity markets that have resumed their ascent, with the MSCI All Country World Index now up an impressive almost 42% since the March lows.
As mentioned in previous blogs, however, the problems that plague the world economy are far from being resolved and although a recovery at this stage is possible, it is probably going to be a sluggish one that will most likely last a very long time. The government led stimulus infusions into the various economies have helped avert a complete bloodbath, but they are temporary fixes that come at a price(soaring budget deficits). Businesses face large debts, a significant chunk of which matures soon. With sagging sales and difficulty in obtaining credit, the unemployment rate is likely to continue rising. In this type of environment, it is difficult to see how consumption, whether it is for housing or for other goods and services can rebound in a manner that will make a difference.