Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. These days I'm retired, and I can't by law give you advice. While I do make mistakes, I try hard to do my analysis thoroughly, and to make sure my data are correct (old habits die hard!) Also, don't ask me why I called it "Volewica". It's too late, now.

BTW, clicking on most charts will produce the original-sized, i.e., bigger version.

Friday, March 18, 2011

World Growth on Track

I've just updated my data for world industrial production (IP).

Normally, in the kind of downturn which occurred during the GFC (Global Financial Crisis) the year-on-year change plunges as output collapses, but then zooms as output recovers, simply because the year-ago data were so low: with a low base big positives are generated even if in absolute terms you're not yet back at previous highs.  It's what happens after that that is interesting.  Do the year-on-year changes continue to track back towards zero, implying underlying growth is weak?  Or, after the inevitable mathematically induced "slowdown" (because the base data are so low a big year-on-year change is inevitable) does the rate of change stop falling at a reasonably high level?

It's a mixed picture.  Core Europe (Germany/France), in particular, Germany is sizzling.  IP growth in Germany is 12 percent-ish and has been for several months.  Ditto in Denmark and Sweden (not core but tied into Germany's manufacturing boom.) France is sharing (at a lower rate) Germany's boom.  Spain, Italy and the UK aren't quite so hot, but they're still growing faster than they were before the crisis. Singapore, HK, Taiwan, Korea are simply racing along, and whereas growth in China slowed abruptly as the authorities tightened (don't look at interest rates for evidence -- these guys tighten the old-fashioned way, with liquid asset requirements), it now appears to have bottomed.  And as I said a coupla days ago, US stats are strong.

World growth is fine.  The current correction in the markets is just that:  a correction.  At some point, though, as spare capacity is used up outside the BRIC countries, the powerful policy stimuli introduced to combat the GFC will have to be withdrawn.  It'll get interesting, then.

All data seasonally and extreme adjusted using NBER methodology

No comments:

Post a Comment