Previous posts suggested that global economic growth would revive from mid-2015, reflecting stronger developed-world demand following a pick-up in real money expansion in late 2014 / early 2015. Incoming business survey results are consistent with this forecast. The first chart shows a selection of developed-country manufacturing survey indicators for which a July reading is available. Four of the five have recovered significantly since the spring, with all now above their average levels since 2010.

The obvious concern is that a revival in developed-world demand will be offset by further weakness in China and other emerging economies. The Markit Chinese PMI manufacturing new orders index fell sharply in July but is above previous lows over 2011-14, when industrial output was rising more strongly than recently – second chart. The survey responses may have been influenced by recent stock market turmoil; the equity analysts’ earnings revisions ratio was stable in July. Official PMI survey results, based on a larger sample, will be released shortly.

Monetary trends do not suggest a deterioration in emerging-world economic prospects. Six-month real narrow money growth in the “E7” large economies, indeed, has firmed recently, while G7 expansion continues to moderate from its February peak; the G7 / E7 gap is at a nine-month low – third chart*. Reflecting the G7 slowdown, the preferred scenario here is that stronger global economic growth during the second half will give way to another moderation from early 2016 – see previous post.

*E7 June datapoint estimated based on data for five countries.