As previously discussed, a fall in six-month global real narrow money expansion since November 2011 suggests a decline in six-month industrial output momentum from May 2012, allowing for the typical half-year lag. The level of real money growth, however, remains respectable, consistent with an economic slowdown rather than anything worse – see first chart.

Eurozone money supply figures for February released on 28 March will be important for confirming this assessment. The hope is that the ECB’s liquidity injections have stabilised the banking system and restored confidence, thereby improving spending prospects. Such a scenario should be reflected in a shift of funds into M1 deposits – a usual precursor of a recovery in economic activity. Faster Eurozone real M1 growth could compensate for a slowdown in the US, supporting the global measure at a level consistent with continued moderate economic expansion – second chart.

The optimistic scenario was dented by yesterday’s disappointing “flash” Eurozone PMI surveys for March – the key manufacturing new orders index fell to a three-month low. It is too early, however, for the positive effects of the ECB’s actions to show up in such surveys. The results, moreover, are at odds with a continued improvement in the balance of equity analysts’ earnings upgrades and downgrades, suggesting a PMI rebound next month – third chart.

Posts since 2009 have argued that the late 1970s provides a template for the current global economic cycle. The fourth chart updates a comparison of six-month industrial output expansion across the two periods, demonstrating a similar “pulse”, with recent economic acceleration occurring on schedule. The suggestion is that momentum will peak in mid 2012 and slow into 2013, while remaining positive – consistent with the current message of the monetary data.