Economic outlook remains bleak as world leaders gather

— -- President Obama sees "glimmers of hope" in the U.S. economy, while Federal Reserve Chairman Ben Bernanke spies "green shoots" sprouting from the barren financial plain.

Look hard enough, and a few wobbly signs of life are visible outside the United States, too. China's 6.1% rate of first-quarter growth, though only about half the rate at which it was expanding in mid-2008, offers some solace. The most recent global industrial production figures show the fourth quarter's collapse in output has eased a bit from its white-knuckle pace. And after six months of downward revisions, economists at JPMorgan earlier this month even cautiously raised their global economic forecast.

The increase, however, was a barely perceptible 0.3 percentage points. Investors greeted the prospect of world output shrinking in 2009 by 1.5% rather than 1.8% with something less than euphoria. "It's better to have some green shoots rather than nothing at all. But the green shoots could be weeds," says Kenneth Rogoff, former chief economist for the International Monetary Fund.

As the world's finance ministers and central bank chiefs descend on Washington for this weekend's annual meeting of the IMF and World Bank, those few spindly green tendrils remain pretty lonely. Business sentiment in Germany is terrible. Japanese exports are in a terrifying state of near collapse. And the evaporation of private cross-border capital flows is starving emerging economies, especially in Eastern Europe, of desperately needed financing.

For the United States, the pronounced weakness in Europe, Asia and pretty much everywhere else means a key escape route from the crisis is blocked. In previous recessions, the U.S. could export its way out of trouble. (In the three years before the crisis, exports were responsible for 47% of U.S. economic growth.) But with customers around the world digging in for a long siege, exports are "unlikely to provide much support for domestic production going forward," Federal Reserve Governor Donald Kohn said in a speech earlier this week, adding that the global economy had yet to hit bottom.

In a pair of reports this week that will guide the weekend talks, the IMF warned that despite a full-court press by major industrial and developing country governments, both the global economy and financial system remain deeply impaired. In the worst recession since World War II, world output is expected to contract by 1.3% this year.

"The downturn is truly global: Output per capita is projected to decline in countries representing three-quarters of the global economy," the IMF said.