Suddenly, a Sunny Outlook For Global Economy

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Host with the most: U.S. Treasury Secretary Paul O'Neill at a G7 news conference

Maybe it was the warm weather. Maybe it was that the expected onslaught of anti-globalism protests never materialized. And maybe it was the U.S.'s first-quarter GDP numbers. But considering the currently tenuous state of the global economy — slowdown in the U.S., slowdown in Europe, recession in Japan, not to mention the ongoing meltdowns in Turkey and Argentina — this weekend's meeting of finance ministers and central bankers from the G7 industrialized nations was a surprisingly cheery affair.

"The world prospects are good going forward," Treasury Secretary Paul O'Neill declared over the weekend, reporting a sense of "real optimism" among the attending officials. That outlook is considerably brighter than one released by the International Monetary Fund, but it reflects a growing sense that the bullet of global recession has indeed been dodged.

After all, Wim Duisenberg, the euro-zone's Alan Greenspan, had just declined to cut interest rates last week, citing not only the apparent "downward stickiness" of price inflation amid Europe's economic slowdown but also a belief that the region's own storm clouds were dissipating, and at the talks nobody seemed inclined to savage him for it. Officials also urged the new guy, freshly appointed Japanese finance minister Masajuro Shiokawa, to go ahead with sure-to-be-painful economic reforms back home — and never mind the short-term risks to the rest of the economic world.

It looks like the U.S. might be able to take it. Any discussion of a global recession starts with the world's largest economy and its heroically ravenous consumers. And so far, the almighty credit card seems to be doing the job again, with U.S. consumer spending accounting for 90 percent of all U.S. economic growth in the first quarter of 2000. Led possibly by Fed cuts in interest rates, home sales — which in turn tend to lead all sorts of other purchasing — are at record highs, and the steep fall in consumer confidence over the last six months has so far not showed up in spending habits.

Monday, the good news continued to trickle out. According to the Commerce Department, U.S. consumer spending and personal income both rose in March — spending by 0.3 percent after rising a revised 0.2 percent in February, and personal income grew 0.5 percent after rising the same amount the month before.

Those growth numbers aren't steroidal, but they're still growth numbers. And that's what all the cautious optimism is about. The world isn't likely to go into recession unless the U.S. does, in the U.S., the current thinking is that with Greenspan still slashing interest rates and the apparent winter trough of U.S. growth receding in the rear-view mirror, the worst of America's troubles with its burst bubble may be over.

The G7, including the U.S., all remain in the neighborhood of the brink, and Japan could still drag the rest of them down if the banks start to go under. But for now, with the U.S. apparently holding its own, Europe feeling confident and Japan in at least a stable coma, the view from the world stage is downright — comparatively, at least — sunny.

Which may explain why French Finance Minister Laurent Fabius reportedly had to talk O'Neill out of playing hooky from some talks to go for a spin in his Audi convertible.