global industrial production

One of the nicer and underused datasets available for free come from the CPB World Trade Monitor which can be found by clicking here.  Along with estimates of global trade flows, there is a nice breakdown of global industrial production. This is particularly critical to demand for commodities.

Looking at the last couple of years, there has been a growing divergence in performance amongst both advanced and emerging economies.

IP in Advanced economies is going nowhere

 As the chart on the left shows, Europe's foray into austerity has seen it weaken substantially since the debt crisis intensified at the end of 2011, although appears to have stabilised at low levels.  The US has performed much better, although IP has been flattish more recently and faces more serious fiscal contraction heading into 2013.

Japanese IP has been consistently weak, failing to reclaim pre-Tohoku disaster levels, with a strong yen a consistent weight, with regional tensions with China a more recent issue.

The very flat performance of advanced economy IP seems unlikely to change soon.

Emerging markets have unsurprisingly performed better, with a China-driven Asia accounting for the bulk of the gains. But more recently activity here has also flattened out. This is partially due seasonality in the data, but is more importantly a consequence of a weaker external sector and weakness in domestic demand thanks to prior policy efforts.

Both monetary and fiscal policy has been loosened in China and there are signs that it is starting to get greater traction on activity.  But against the backdrop of where we have been, markets are likely to remain cautious.

Emerging markets have also flattened in recent months

Emerging markets need to get back in the drivers seat

On aggregate, the lack of momentum both in the advanced and emerging worlds has meant that global IP has gone nowhere for the best part of 6 months.

This is perhaps not a terrible outcome given the trauma inflicted on financial markets late last year.  But the signs of improvement at this stage are fairly tentative.

Against this backdrop, most will continue to be on edge when it comes to investment decisions, be it fast moving money in markets, or medium term investment plans of companies.