The global economy is dominated by the G7 countries and the seven largest emerging economies, or “E7”*. Six-month growth of industrial output in these fourteen economies rose to an estimated 2.3%, or 4.7% annualised, in December**. The longer leading indicator calculated here suggests that the recent upswing will extend through the first half of 2015, at least – see first chart.



The recovery in G7 plus E7 growth from a low in August 2014 reflects stronger expansion in both groups. Growth remains significantly higher in the E7 than G7, although the current gap is below its average since 2010 – second chart.



The G7 and E7 aggregates are calculated from World Bank country data on industrial output in constant (2005) US dollars. On this measurement, E7 industrial output now exceeds the G7 level. The ratio of E7 to G7 output has risen from 49% at the start of 2005 to 100% in September 2014 and 101% by December – third chart.


E7 / G7 convergence reflects enormous growth of industrial output in China. China now accounts for 62% of E7 output and 31% of the G7 plus E7 aggregate. The latter compares with 22% for the US. On the World Bank figures, Chinese industrial output surpassed the US level as long ago as 2009. Chinese output has risen by a cumulative 228% since January 2005 versus 34% for the rest of the E7 and only 4% for the G7.

*BRIC plus Korea, Indonesia and Mexico.  The G7 plus E7 countries account for three-quarters of global industrial output, according to World Bank data.
**80% data coverage. December output is assumed to be unchanged from November for missing countries.