Six-month growth in global* industrial output rose further to 2.6% in November, or 5.3% annualised – the fastest since October 2011. Monetary trends and global leading indicators continue to suggest that momentum is at or close to a peak.
The first chart shows short- and longer-term leading indicators, constructed by transforming and combining the OECD’s country leading indicators, a November update of which was released today. The longer indicator has led growth turning points by an average of five months in recent cycles and peaked in September, suggesting a February top in output expansion.
The short indicator typically leads by two or three months and moved sideways in November, consistent with output growth reaching a maximum in January or February.
Monetary trends suggest an earlier peak: global real narrow money expansion usually leads by about six months and has trended lower since May 2013 – second chart.
The decline to date in the longer leading indicator has been minor and the expectation here is that economic growth, while moderating, will remain solid in early 2014. A further slowdown in real money expansion, however, would raise concern about prospects for later in the year**.
*G7 developed countries and seven large emerging economies (“E7”).
**An early estimate of December global real money growth will be available later this week and will be reported here.
