IT HAS been deep and nasty. But the worst global recession since the 1930s may be over. Led by China, Asia's emerging economies have revived fastest, with several expanding at annualised rates of more than 10% in the second quarter. A few big rich economies also returned to growth, albeit far more modestly, between April and June. Japan's output rose at an annualised pace of 3.7%, and both Germany and France notched up annualised growth rates of just over 1%. In America the housing market has shown signs of stabilising, the pace of job losses is slowing and the vast majority of forecasters expect output to expand between July and September. Most economies are still a lot smaller than they were a year ago. On a quarterly basis, though, they are turning the corner.

This is good news. The first step in any recovery is for output to stop shrinking. But the more interesting question is what shape the recovery will take. The debate centres around three scenarios: “V”, “U” and “W”. A V-shaped recovery would be vigorous, as pent-up demand is unleashed. A U-shaped one would be feebler and flatter. And in a W-shape, growth would return for a few quarters, only to peter out once more.

Optimists argue that the scale of the downturn augurs for a strong rebound. America's deepest post-war recessions, they point out, were followed by vigorous recoveries. In the two years after the slump of 1981-82, for instance, output soared at an average annual rate of almost 6%; and this time round, output has slumped even further, and for longer, than it did in the early 1980s.

Pessimists, meanwhile, think this downturn's origins favour a weak recovery or a double-dip. Unlike typical post-war recessions this slump was spawned by a financial bust, not high interest rates, and when overindebted borrowers need to rebuild their balance-sheets and financial systems need repair, growth can be weak and easily derailed for years. Japan's 1990s banking crisis left the economy stagnant for a decade; a premature tax increase in 1997 plunged it back into recession.

V for vulnerable

Neither of these parallels is exact, because today's global slump combines several types of downturn and an unprecedented policy response. In formerly bubble economies, it is largely a balance-sheet recession. Debt-fuelled consumption has been felled. But the scale of collapse was broadened and deepened by the freezing up of the machinery of global finance, a dramatic collapse in confidence and stock-slashing. It was then countered with the biggest stimulus in history. The shape of the recovery depends on how these forces interact.

In the short term that shape could look beguilingly like a “V”, as stimulus kicks in and the inventory cycle turns. In emerging Asia, the unfreezing of trade finance, a turnaround in stocks and hefty fiscal stimulus are powering a rebound. Government support, especially employment subsidies and incentives toa buy new cars, has cushioned demand in Germany and France (see article). With export orders rising and confidence growing, the next few months could be surprisingly buoyant. Even in America, the fiscal stimulus is kicking in, the “cash for clunkers” scheme is a big, if temporary, prop to output and firms will, sooner or later, stop cutting inventories.

Yet a rebound based on stock adjustments is necessarily temporary, and one based on government stimulus alone will not last. Beyond those two factors there is little reason for cheer. America's housing market may yet lurch down again as foreclosures rise, high unemployment takes its toll and a temporary home-buyers' tax-credit ends (see article). Even if housing stabilises, consumer spending will stay weak as households pay down debt. In America and other post-bubble economies, a real V-shaped bounce seems fanciful. Elsewhere, it will happen only if vigorous private domestic demand picks up the baton from government stimulus. In Japan and Germany, where joblessness has further to rise, that seems unlikely any time soon. The odds are better in emerging economies, especially China. But even there an array of reforms, from a stronger currency to an overhaul of subsidies, is needed to boost labour income and encourage consumption. Until that shift takes place, the global recovery will be fragile and probably quite feeble. A gloomy U with a long, flat bottom of weak growth is the likeliest shape of the next few years.