Unemployment continues to grow across the globe, with no countries remains unaffected by the global recession. In the Unites States the unemployment rate reached 7.2 per cent in December, its highest level since 1992. This followed a loss of almost 600,000 jobs in the month, the largest drop in over thirty years. Unemployment will continue to rise in most countries for the majority of 2009.

Nevertheless for the first time in quite a few months the latest economic data has started to show some glimmers of hope. This is not to say that there has been a dramatic improvement in the global economy, but there are perhaps some signs that the rate of economic contraction is decelerating. Although this means that the economy is still shrinking it could be the first steps towards reaching a trough.

Earlier this week the Purchase Manager Indices (PMI) figures for manufacturing and services showed an improved economic environment in both the UK and Europe. It showed that manufactures were benefiting from lower input prices, whilst those in the UK were starting to be helped by the rapid weakening of the pound. Services in the UK and Europe were also buoyed as lower interest rates and government intervention increased the outlook for the sector.

Later in the week the US ISM survey of non-manufacturing businesses improved for the second month in a row. It indicated that business conditions were improving, despite new orders continuing to fall. The US PMI manufacturing survey also increased in the month. Again both indices were improved but implied further economic contraction.

It should be remembered that these figures are indicating changes in the month, and therefore it is dangerous to read too much into them. It should also be noted that the employment parts of these surveys continue to deteriorate, representing an acceleration of unemployment.

Nevertheless the stage is being set for what will be a long crawl back to positive economic growth. Inflation continues to fall in Europe and the US, giving policy makers the room to cut interest rates further or to use monetary stimuli such as quantitative easing. Falling inflation will also help to boost real incomes, whilst reducing the attractiveness of savings, providing a much needed boost to consumer spending.

On top of this, lower interest rates and rising unemployment will provide benefits to business. Although, banks remain unwilling or unable to increase lending to businesses, there are early signs that the bond market is starting to re-open (although at a high price), whilst some bank facilities have become significantly less expensive. In addition, being able to cut jobs has enabled some companies to reduce costs, increase productivity and adapt to the changing business environment.

A return to normal economic conditions remain a long way away, even positive quarterly economic growth is unlikely in a number of countries until 2010. However, should the latest economic indices continue to improve then perhaps we are seeing a light at the end of the tunnel. The tunnel is likely to be quite long, but now could be the best time to start preparing for the upturn.

It is good to see the Fed taking the bull by the horns...or should that be the bear by something?

They have cut interest rates to a range of between zero and 0.25% today. This cut recognises the magnitude of the problems that the US and the global economy is in.

As a student of the Great Depression Ben Bernanke has taken proactive steps to try and curb the US economic downwards spiral.

This cut will not be enough to get the economy out of the hole but it will go some way to helping in the long run. Don't expect instant results from this cut. The banks, in their current state, will take a while to pass on the cut to consumers and to start to lend again to business.

Expect 2009 to be a long and painful year, but for some, particularly those on fixed incomes, falling prices and lower interest rate cuts could come as a pleasant boost.

It has been a couple of months since the Lehman Brothers and the subsequent fall out. Over the last few months it seems that things in the financial markets have stabilised and because of global government actions we shouldn't see too many more major financial institutions collapsing. I'm sure some firms will get into trouble but for now I don't think another Lehman's will happen - particularly as Citi was rescued.

Sadly the downturn in the wider economy is still in full force and likely to get worse before it gets better. Nevertheless, with interest rate cuts, falling prices, government fiscal stimuli and the early indications of stability in the financial markets could we be reaching a bottom?

Well it seems possible that we might be reaching the bottom in financial markets. Equity prices seem to be very undervalued and presenting great opportunities to those with capital to invest.

Sadly the real economy lags the stock market and will continue to weaken over the next six months before reaching anything like a bottom. In countries like the UK the bottom is likely to take much longer.

As the real economy falters this will have a negative impact upon financial markets once more, limiting the extent of the rebound, and keeping us bouncing along the bottom for some time yet.

Being full of seasonal joy I am optimistic that this is the light at the end of the tunnel that we've all been looking for...I just hope that that light isn't a train coming in the opposite direction.