A post in July argued that global industrial momentum would revive in late 2010 in lagged response to faster growth of G7 real narrow money M1 since the spring. Last week's manufacturing purchasing managers' surveys for October were supportive, showing the first improvement in new orders since April – see first chart.

The acceleration in G7 real M1 has stalled recently, though growth remains respectable – second chart. The message is that global economic expansion will continue but at a slower pace than from mid 2009 and mid 2010, when industrial output staged a V-shaped recovery. Such a scenario would maintain the resemblance of the current global upswing to that following the first oil crisis recession of 1974-75 – third chart.

What could go wrong? As previously discussed, one risk is that higher commodity prices stemming in part from US "QE2" lift G7 inflation and deflate real M1 expansion, as well as forcing further monetary tightening in overheated emerging economies.

Within the G7, real M1 growth has picked up strongly in the US while continuing to slow in the Eurozone – fourth chart. Until recently, economic news has tended to surprise positively in the Eurozone while disappointing in the US but this trend should now reverse, lending support to the US dollar versus the euro.

In early evidence of such a shift, last week's US PMIs were stronger than expected and better than those in the Eurozone. Payrolls and vehicle sales numbers were also upbeat. By contrast, German manufacturing orders fell by more than expected, albeit following significant strength. As expected given monetary weakness, there was further bad news from the periphery in the form of weaker Spanish industrial output – fifth chart – and a slump in Irish consumer expectations – final chart.