Global recovery on track despite October stall
Simon Ward
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Combined industrial output in the Group of Seven (G7) major countries and seven large emerging economies (the "E7" – Brazil, China, India, Korea, Mexico, Russia and Taiwan) rose by 8% between February and September but fell back marginally in October – see first chart. Within the G7 there were large declines in Germany and France, partly reflecting lower car production after the end of "cash for clunkers" schemes, while among the E7 output was down in India, Russia, Korea and Taiwan, in all cases following strong gains.
The October setback was not signalled by business surveys and probably represents a pause for breath in an ongoing solid recovery. As the chart shows, a composite of the OECD's leading indices for the G7 and E7 countries continued to rise strongly in October. G7 narrow money trends also suggest favourable near-term growth prospects – see previous post. Today's Chinese output numbers for November were upbeat.
The recent recession and current revival in world industrial output bear a close resemblance to the deep 1974-75 contraction and subsequent recovery – see second chart and another prior post for more discussion. This comparison suggests a continuing upswing through 2010 but with growth momentum slowing as the year progresses.
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