Global industrial growth has peaked, judging by April manufacturing purchasing managers' surveys, showing a slowdown in order inflows across the major economies – see first chart.

The global industrial slowdown partly reflects supply chain disruption due to the Japanese earthquake but is also consistent with a peaking of G7 real narrow money growth last summer, allowing for the usual six to 12 month lag between money and the economy. Monetary trends, however, have yet to suggest serious economic weakness: G7 real narrow money is still expanding, in contrast to a contraction before the last recession – second chart.

Slower growth within an ongoing economic upswing would maintain the similarity between the current cycle and the recession / recovery of the mid to late 1970s – third chart. This "template" suggests another recession starting in late 2013, a scenario that would fit with central banks raising interest rates in 2011-12 to curb inflation, allowing for a roughly two-year lag between policy changes and their maximum economic impact.

The risk of an earlier downturn focuses on emerging markets, where monetary authorities have allowed economies to overheat and now face a tough challenge in trying to engineer a "soft" landing. China's headline PMI new orders index showed little change in April but looks much weaker when adjusted for seasonal effects (i.e. the tendency for orders to rebound after the Chinese New Year holiday) – first chart. Indian monetary conditions, meanwhile, are restrictive, with M1 slowing sharply in recent months and the yield curve close to inversion – fourth chart. (India's repo rate was hiked by a further 50 basis points to 7.25% today.)