Ray of light: Global economic confidence rises to 11-month high

It has been a mixed week for the markets, with financial institution bulls and bears engaged in yet another tug-of-war over Dow 8,000.

However, there is one objective, positive data point that the bulls can point to: confidence in the global economy. Confidence in the global economy has risen to an 11-month high on the heels of public policy efforts to loosen credit markets, a new Bloomberg News survey indicates.

A positive shift in psychology

The Bloomberg Professional Global Confidence Index, which surveys 3,550 users, rose to 21.2 in April from 5.95 in March, Bloomberg News reported. A reading below 50 means pessimists outnumber optimists. The survey was conducted April 6-10.

Sentiment improved the most in Asia and the United States, as respondents became more confident that their recessions may be bottoming, Bloomberg News reported.

Economist Peter Dawson, who was not a part of the survey, told DailyFinance Thursday the U.S. and global economies will need continued attention from both fiscal and monetary policy officials, but there is a sense building in economics and financial circles that we're starting to get some traction.

"The fiscal stimulus is beginning to take effect, and we've already seen improvement in the credit markets, so there is a sense that we're approaching a bottom," Dawson said. "Investors should not expect hiring to pick up first, because employment is a lag indicator, but we should first see a turnaround in durable goods orders and factory orders, followed by stabilization in housing and retail sales. Like Fed Chairman [Ben] Bernanke, I believe the sharp decline in the U.S. economy is easing, but there's a long way to go before we can call our economy healthy."

In the latest Bloomberg News confidence survey, U.S. participants' confidence rose to 23.9 from 5.2; Japan respondents' increased to 22.5 from 4.5; Western Europe, to 14.2 from 8.2.

Economic Analysis: There's building sentiment that the fiscal and monetary policies are not only increasing demand above what they would be without the stimulus, but they're also putting a floor under confidence. Why is the latter relevant? Confidence, or market psychology, is a major factor in business decisions. Recessions don't end when every business decision maker has overwhelming evidence that a recovery has started, but when the typical small-to-medium business executive says, "Business revenue is o.k., we can upgrade our office computer systems now." Or, "Houses are selling at a decent pace. I can add that new heating and air conditioning installation team I wanted to add last year."

That said, investors should not expect a stupendous recovery, but a slow, incremental rise out of a pronounced recession. Real median incomes are nowhere near high enough to forecast a robust recovery.

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