Global economic weakness highlighted by below-expected output data this week was signalled by slower real narrow money expansion in late 2013. Money trends have since improved, with incoming April numbers mostly positive: investors should beware of economic pessimism.

US industrial output fell by 0.6% in April, Chinese production was flat, while Japanese manufacturing is expected to have contracted by 1.4%, according to a METI survey. Eurozone first-quarter GDP growth, meanwhile, was 0.2% versus a consensus 0.4% and the US number will probably be cut to negative later this month.

The available April information suggests that global six-month industrial output growth fell to about 1.5% last month, a 10-month low – see first chart. The forecast here has been for growth to reach a trough around May.

Global six-month real narrow money expansion rebounded from November 2013 and remained solid in April, based on available data. US growth was little changed while Brazil, China and India rose – second chart. Japanese April money numbers were disappointing – see Wednesday’s post – but the sharp fall in real growth mainly reflects a temporary inflation spike caused by the sales tax hike. This explains the currently-estimated small decline in the global measure last month – first chart.

Stronger global industrial expansion over the summer should be led by the US, which has driven the improvement in monetary trends. Consistent with this view, US retail sales have rebounded from winter weakness, suggesting that the ISM manufacturing new orders index, a good indicator of the industrial cycle, will recover by June – third chart.