Did G7 output bottom in March?
Simon Ward
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Two Group of Seven (G7) countries have released April industrial output figures: the US registered a 0.5% decline and Japan a 5.2% gain – see first chart. The Japanese rise dominates and suggests a small increase in G7-wide output in April barring significant weakness in European data due in a fortnight's time.
G7 output peaked in February 2008. A bottom in March 2009 would imply a 13-month recession, similar to the duration of the 1974-75 and 2000-01 downturns (12 and 11 months respectively) – second chart. The recent fall, of course, has been much larger, with a 19% peak-to-trough drop versus 12% in 1974-75 and 7% in 2000-01.
A post last December predicted a G7 output bottom in March based on a pick-up in inflation-adjusted narrow money M1. Real M1 is showing very strong annual growth, supporting near-term economic recovery hopes – third chart. It has, however, slowed over the last three months – further weakness could signal a loss of economic momentum in late 2009.
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