Some criticise me for following world industrial production. "Most economies are mostly non-manufacturing these days", they say. True, but the business cycle is normally driven by manufacturing and construction. Covid was the exception, but the crash wasn't caused by monetary or fiscal policy, but by actual lockdowns. "What matters is GDP, not sub-sectors of GDP", they say. Also true, but GDP is quarterly and only published with a lag, whereas IP is available monthly. And the business cycle components of IP and GDP are very similar, as the chart below shows. The recent divergence between the two is because of the lagged demand for services because of lockdowns. I don't know how much longer that'll continue. As the manufacturing recession deepens, it seems probably that services will follow.
World IP has started to fall, and it seems more than likely that GDP will also fall.
The chart below shows the 6-month rate of change in world IP, whereas the chart above shows the deviation from trend of world IP (and GDP). It is now firmly negative. However, the latest month is partially based on a new technique I'm using: estimating industrial production from manufacturing PMI surveys, though actual IP data for the US and China are used. The estimates are for some of the other countries that make up world output data. We'll see how effective that is over the next couple of months.
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