Based on November data for the US and Japan and October figures for other countries, G7 industrial output is about 7% below its peak reached in February 2008. This exceeds the decline during the 2000-01 recession and is almost as large as over 1980-82. The biggest post-war reduction occurred in 1974-75, when output plunged 12% from peak to trough – see chart.
Surveys signal a further decline by early 2009: for example, Japanese manufacturers plan to cut production by 8% in December and 2% in January, according to the Ministry of Economy, Trade and Industry. Reductions elsewhere should be considerably smaller but the cumulative fall in G7 output should soon approach 10%, making the current recession the second worst since the war.
As previously noted, the initial decline in output in the three prior recessions was over after a year, suggesting a trough by February 2009. Monetary trends are also consistent with a bottom in early 2009: annual G7 real M1 growth has been picking up since August and typically leads activity by about six months.
