With data available for all but one country (Korea), six-month growth in G7 plus emerging E7 real narrow money is estimated to have firmed to 3.6% (not annualised) in January from 3.5% in December. The January estimate is down from 4.2% in October but is solid by historical standards – see chart. Allowing for the usual half-year lead from money to the economy, the suggestion is that six-month industrial output expansion will peak in the spring but remain respectable into the summer.

Global real narrow money correctly signalled last year’s economic weakness – its six-month growth slumped from 4.8% in October 2011 to 1.9% in April 2012, before reviving to the October peak. Global industrial momentum slowed sharply over the spring and summer of 2012, reaching a low in September, i.e. five months after the real money trough. The subsequent recovery in global industrial activity appears to have extended in February, judging from manufacturing purchasing managers’ surveys released last week.

While narrow money works better empirically, broad money trends also suggest continuing economic expansion – six-month G7 plus E7 real broad money growth was an estimated 2.6% in January.

The January global money numbers may have benefited from a temporary boost to Chinese data from the late New Year holiday. China will issue February statistics next week.

The next key release for assessing global economic prospects will be the January update of the OECD’s country leading indicators on Monday 11 March. As previously discussed, the global longer leading indicator calculated here from the OECD data currently suggests a modest economic slowdown from the spring, echoing the message from real money trends.