World industrial production – proxied by the combined output of the Group of Seven (G7) major countries and seven large emerging economies (the "E7") – resumed rapid growth in November. Based on data for six countries accounting for nearly two-thirds of the G7 plus E7 total, output rose by more than 1% after a 0.2% October decline.
G7 plus E7 production has now recovered by 9% since its February 2009 low, retracing more than half of the 16% decline from the peak in February 2008.
The rebound in G7 plus E7 output continues to mirror the recovery in G7 production following the 1974-75 recession – see first chart. (G7 output is an acceptable proxy for world production in the 1970s, when emerging economies were less significant.) This comparison suggests further solid growth in 2010 but with momentum slowing as the year progresses.
The implication of a momentum peak in the first half of 2010 is supported by monetary trends – annual growth in G7 real M1 appears to have topped in August 2009 and typically leads output expansion by about six months. E7 real M1, however, is still accelerating, suggesting that emerging economies will continue to lead the recovery – second chart.
