It’s all relative of course, but we have probably just had the best week of data on the global economy for a year.

Government stimulus spending has worked everywhere — bar Europe. But the flow of good news left one major question in its wake: the slump might have steadied but when will non-stimulus, organic, growth appear?

The good news went beyond the Chinese growth numbers. We had better news on US growth, industrial production, and unemployment. Asia is growing in patches, but stockmarkets in the region are overbought and heading for a nasty fall. In Australia we had a sharp up turn in business conditions to go with strong business confidence. Another consumer confidence survey from the Morgan group revealed a solid rebound in confidence to the highest level since February 2008 and Rio Tinto’s iron ore production figures were a bit better than expected for the June half year.

Singapore upgraded its economic forecasts after a second quarter rebound from the deep recession of the first half. But like China, the Singapore recovery was narrow and based on a sharp improvement in the pharmaceutical sector, a key part of the country’s economy.

South Korea’s central bank also upgraded its outlook for the year and it seems the country’s economy is out of recession. The country is a major trading partner of ours: Posco, its steel giant, has lifted its steel output forecasts for the rest of the year as global demand recovers in a stock building phase, and because of the Chinese recovery.

Inflation remains under control all around the world. New Zealand is seeing light at the top of the cliff and the Fitch ratings group switched its outlook to negative from stable, reversing the Standard & Poor’s move in March.

Corporate profits among US banks seems to be a bit better than expected, except when you look at the detail and find losses in credit cards, lower profits in funds management: trading income strong, banking income weak. But that’s what’s expected by US regulators. They know the rorters have to do well from trading because there’s no way else of rebuilding confidence, capital and lending. And without that the US economy won’t grow.

But even the Chinese know there’s much to be done and that the growth figures are not as rosy as they seem.

The Chinese recovery is not yet on a solid footing and the economy is growing below potential. Prices are still falling; overall demand is weak; some industries face overcapacity; and the industry use rate is low. Corporate profits are still weak, but not as weak as earlier in the year. Overall the economy remains unbalanced, and that’s a danger to the future stability of growth (and of course “social harmony”).

The unbalanced nature of the economy showed up in a breakdown of the first-half GDP growth rate of 7.1%. Investment accounted for 6.2 percentage points of overall growth, showing the emphasis on building roads, railways and other infrastructure in the government’s stimulus package. Consumption contributed a positive 3.8 percentage points to GDP, but net exports subtracted 2.9 points — a reflection of the slump in demand for Chinese goods triggered by the global crisis.

But then the same can be said about every other economy at the moment: rebalancing will depend on finding some way to restart organic growth from consumers.

The big threat remains the enormous over capacity in cars, electronics, ship building, steel, consumer products, aircraft building, you name it, reducing the enormous surplus of capacity is the ultimate deleveraging phase.

It can be eliminated by rising demand and international trade, or that can be stimulated by scrapping plant and equipment and accepting several low years of below potential growth while demand and capacity get rebalanced.

Germany, the US, China, Japan, the UK, France and Spain, to name a few, have car scrappage schemes which are being sold as helping the industry and employment by stimulating demand. Some even claim to be green by scrapping older cars in favour of more efficient and greener models. That’s pork barrelling and pump priming of the most basic rort.

A smarter scheme would have been to run a capacity scrapping scheme, with help to unemployed workers and supply firms. that way the overcapacity would have been cut faster than it will be.

Or Governments in Europe who have no guts when it comes to tough decisions, could have taken a leaf out of the brutal way the Obama Administration has forced GM and Chrysler to re-organise, imposing tens of billions of dollars of losses on creditors, but slashing employment, costs and capacity. Harsh, but next year the US car sector will be far better balanced and growth in demand will be closer to capacity.

But in America, housing remains the ultimate deleveraging and it will be a long hard slog from the current depression. 1.5 million US homes were subjected to 1.9 million foreclosure or other related actions in the first six months of 2009. Look at the figure another way, that’s the number of homes in a city around 40% or so larger than Sydney. Around 6 million people would have been impacted by those moves. no wonder around 33 million American men, women and children are on food aid.