In January, the IMF predicted that the UK would suffer the largest GDP decline of the Group of Seven (G7) economies in 2009. This forecast looked suspect at the time – see here – and is not supported by recent data.

UK GDP peaked in the first quarter of last year and had fallen by 2.2% by the fourth quarter. Over the same period, however, GDP dropped by 3.0% in Italy, 3.1% in Germany and a whopping 4.8% in Japan. Canada was the best performer among the G7, with a decline of just 0.5%.

According to figures released today, UK industrial output fell by a further 2.6% in January to stand 11.4% below its level last February, when G7 industrial activity began to contract. Germany, France, Italy and Japan have all registered larger declines, however, while UK performance is only slightly worse than the US – see first chart.

Forward-looking indicators are also no weaker than the average. The second chart shows a measure of new orders derived from purchasing managers’ surveys of manufacturing and services. The UK indicator has risen for three consecutive months and is slightly above its US counterpart and significantly higher than the Eurozone measure, which is still falling. Meanwhile, stock market earnings revisions have been less negative than elsewhere recently – third chart.

Countries that tackle the shortage of money and credit will be the first to emerge from recession. The MPC should have embarked on “quantitative easing” last autumn, at the same time as the US Federal Reserve. It has at least acted before the European Central Bank and Bank of Japan, suggesting the UK is well-placed to recover earlier than the Eurozone and Japan.