An examination of the data flow points to a continuation of the global economic recovery. And in the near term, the trend is likely to be sustained because of the unwillingness of authorities to withdraw stimulative policy measures. However, further out, into next year the outlook becomes increasingly uncertain.

Global leading economic indicators continue to trend higher, pointing to fairly decent growth numbers being registered in the final two quarters of the year. Also, the purchasing managers' index has been climbing sharply and is currently above the fifty level, indicating rising global activity. Industrial production is also on the rise.

At the same time, surprise indices for economic data are beating expectations, even as forecasts continue to be upgraded. The outcome is particularly encouraging in some of the bigger economies of the emerging world, particularly China. This has been propitious for big exporters of raw materials such as Australia.

But activity in large manufacturing economies has also picked up, with the largest economy in Europe, Germany, being a good example.

In the United States, government largesse has boosted spending. Personal consumption expenditure has been fuelled by purchases of durable goods, driven partly by the 'cash for clunkers' car rebate programme. This scheme has now ended but there are other elements of the total stimulus package that continue to operate.

As for the housing market, it appears to have found a footing. Lower home prices and affordable mortgage rates, in conjunction with the government's first-time-buyer tax credit, have helped to revive the market. However, this fiscal measure is scheduled to expire at the end of November and it is hoped that the housing market will not slow down inordinately as a result.

It has come as no surprise that employment conditions continue to lag the rebound in activity. This is normally the case and, given the depth of the recession, we should expect an even slower revival of job growth in this cycle. Obviously, it is necessary to monitor the health of the labour market over the next six months, and not just in the US. But, currently, conditions do not pose an immediate danger to the economic recovery.

The inventory cycle in the US is likely to contribute to growth as de-stocking diminishes. In the first two quarters, firms ran down inventories substantially, contributing to the decline in GDP growth. Now, as inventory decumulation declines, there should be a significant boost to overall growth. Moreover, with the inventory-to-sales ratio falling rapidly, higher demand may have to be satisfied by an increase in output rather than further inventory drawdown.

Stress in money markets has declined considerably, worldwide, and the usual spreads that analysts like to monitor have tightened significantly. One that is a particular focus of attention is the Libor - OIS spread, which is now within the range of normality.

Global monetary policies continue to be expansionary. There is a wide gap between a weighted average of developed-economies' money supply growth and nominal output growth. A similar gap is also present in China. At the same time, the G3 (US, Japan, Eurozone) yield curve is extremely steep. As for the G3 average real two-year government yield, it is very low, hovering around the one percent level.

Policymakers in almost every corner of the world are keen to continue the stimulus programmes to ensure that the recovery does not falter. There is little risk that they will be hasty in unwinding the expansionary policies. On the contrary, the probability is high that they will overdo the stimulation and possibly face a whole lot of trouble in eventually reversing course.

This is particularly true of the US, where the Fed chairman, Ben Bernanke, ardently wishes to avoid the mistake of the 1930s when stimulative policies were reversed too early, leading to a renewed weakening of the economy. Aside from this issue, in the past several decades, the US policy stance has generally been in the direction of promoting maximum growth.

There are several risks that may compromise the global recovery. It is possible that the stimulus programmes may not be entirely successful in initiating fully autonomous private-sector spending growth; so that the government-provided crutch cannot be easily taken away. As mentioned above, in some of the worst-affected countries, such as the US, consumers do face difficulties. Meanwhile, in many countries, the banking system is still reticent about increasing loans to the household sector.

In an alternative scenario, maintaining the stimulus packages for too long may result in the expectation of inflation being revised upwards, particularly if the output gap is being overestimated. In such a case, rising interest rates may crowd out private-sector investment spending, hurt the housing market, and compromise the recovery.

Iraj Pouyandeh is a strategist and senior portfolio manager at LOM Asset Management. He manages the LOM Global Equity Fund. For more information on LOM Asset Management please visit www.lomam.com