In economic affairs, you have to be prepared for the unexpected. To consensus opinion, most of the major economic developments of the past 25 years have come as a bolt from the blue. As it happens, the world economy currently looks as though it could be close to an inflexion point and many economists are worried about a renewed global downturn. By contrast, I am wondering whether it is about to perk up a bit.

The world economy has been weak over the past year due to two related factors – the slowdown in China and the weakness of commodity prices, especially oil. The Chinese slowdown undoubtedly reduced the demand for commodities. Meanwhile, the weakness of commodity prices came to be seen by the investment community as a guide to just how soft the Chinese economy had become.

In the dog days of summer, anxiety reached a peak over the Chinese stock market, which dropped by 41pc in 10 weeks. How different things look now. From its low point in late August, the Chinese market has risen by 23pc. And it now stands almost 50pc above where it was a year ago. It always struck me as fanciful that the Chinese stock market could serve as a bellwether of even the Chinese economy, never mind the world’s. But now it seems as though the stock market funk is over.

Meanwhile, things at least seem to have stabilised and there are even a few hints of pick-up. Mind you, hardly anyone now believes the official GDP figures. Accordingly, at Capital Economics we have constructed our own proxy measure of economic activity, based on such real indicators as freight volumes, passenger numbers and electricity usage. This measure has the virtue that there is no official target for it and its components cannot easily be manipulated by the authorities. Interestingly, it shows that the softness was most pronounced at the turn of the year and that the economy has stabilised since.

David Fuller's view

Here is a PDF of Roger Bootle's column.

I think this is a good summary and I agree with it, having talked recently about the five biggest economies – USA, China, Japan, Germany and UK – being in close proximity for gradually increasing, simultaneous GDP growth. We have not seen this since prior to the 2008 credit crisis slump. 

Inevitably, there are also trouble spots.  The Middle East is a cauldron of worsening religious, tribal and ethnic wars, made increasingly unstable by the collapse in oil prices.  Russia has unnecessarily upped the military ante in the region and also suffered for it. However, I doubt that will keep Mr Putin away for long. 

Every oil producer in the region is hoping that the chaos will disrupt production, although preferably not their own, lifting crude prices sufficiently to at least finance their military effort.  This could happen and paradoxically, it would also help global GDP growth somewhat if crude oil prices moved up into the $70 to $80 range.  

That would be a temporary lifeline for oil producers everywhere.  Moreover, as the world’s most important commodity, it would also trigger short covering in other depressed industrial resources, including metals.  This might actually help stock markets but bond investors would see less deflation and some inflation, while experiencing higher yields in their fixed interest holdings.