This is the week when the world of work returns to normal. It is often also when economists and financial markets reassess how things are after the summer break. This weekend the leaders of the G20 countries have been making their assessment at a meeting in Hangzhou in China.

How does the world economy look now?

A year ago the markets were in a funk about the Chinese stockmarket and, by extension, the Chinese economy.  I argued at the time that the stockmarket weakness was nothing to write home about and, although the Chinese economy had slowed, this was not extraordinary and would not lead to anything like a hard landing.

A year on, this view now seems to be widely accepted. The Chinese stockmarket is roughly flat over the past year, and it looks as though the Chinese economy has grown by 7pc according to the official data, and in reality by perhaps 4.5pc.

Of course, China is not going to be able to grow at the rate it managed a few years ago, but something like 5pc to 6pc is eminently achievable.  Moreover, given the scope for effective policy action if the growth of aggregate demand falters, something like these rates of growth should be realised.

In Japan it looks as though Shinzo Abe’s ambitious plans to raise the country out of its torpor are not succeeding. Japan will probably grow by only about 0.5pc this year.  Mind you, because of a contracting workforce, this is probably about all the economy is now capable of. Admittedly, this is poor, but the world has had to get used to weak Japanese growth for many years.

Meanwhile, most of the rest of Asia has recently experienced an acceleration in growth.  More importantly, worries about the fragility of the US economy have not been vindicated. It will probably grow by about 2pc this year, and employment is still increasing at a decent, although unspectacular, pace, as confirmed by the jobs figures on Friday.

 Interest rates are likely to rise soon, perhaps even later this month, although more probably in December. But the pace of increases over the next two years is likely to be moderate. For much of the past year the markets have also been concerned about the global effects of low oil prices.

This seemed paradoxical, because previously low oil prices were thought to be a good thing for the economy, and for a number of countries they have indeed been good this time round. But the markets were worried about the adverse effects of low oil prices on oil producers, including in the United States and, of course, on a large number of countries whose prosperity is heavily dependent upon oil.

In recent months, however, these worries have been, to some extent, allayed. The oil price is off the bottom and seems to have stabilised at about $50 a barrel. Meanwhile, there are signs of stabilisation, if not quite improvement, in some of the countries that the markets have been worried about, particularly Russia.

To my mind, the biggest source of legitimate concern is the eurozone. By its own low standards, recent economic performance in the zone has actually not been bad. Over the past year, the eurozone as a whole has grown by about 1.5pc. Even the Italian economy has managed to perk up a bit.

David Fuller's view

The global economic news has been a little better than widely feared earlier this year.  Liquidity from QE remains abundant; interest rates are near record lows; everybody says bonds are in a bubble phase, including me.  They are; in fact, how could they not be?  However, the Merrill Lynch Treasury 10-Yr Future Total Return Index remains in an orderly uptrend, so the bubble has yet to burst. 

Meanwhile, are stock markets borrowing from the future?  I think so, by benefitting from global liquidity at a time when global GDP growth is only marginally firmer; corporate investment is low, and corporate profits on average have not risen in line with equity prices. 

Do any of the important stock market indices show evidence of topping out?  Not yet, in my opinion, but keep your eyes on the charts and don’t be surprise when the downward dynamics commence.  

Here is a PDF of Roger Bootle's article.