September data suggesting global industrial resilience

20th October 2014 by The Harried House Hunter

A surprise August drop in global industrial output contributed to current market growth worries but incoming September data suggest a strong rebound.

Two countries in the G7 plus emerging E7 aggregate monitored here have so far reported for September: the US and Russia. Output rose by a stronger-than-expected 1.0% on the month in both cases, more than reversing August falls of 0.2% and 0.3% respectively*.

Outside this group, Polish industrial output rebounded 1.4% last month, also beating market forecasts.

Germany last week reported a 4.0% August output drop but this followed a 1.6% gain in July. The numbers have been heavily distorted by holiday timing effects in the auto sector – car production surged 25% in July before slumping 28% in August. Car output rebounded 19% in September, suggesting that industrial production will reverse most of its August drop – see chart.

Japanese industrial output fell by 1.9% in August but manufacturers’ polled at the time the report was compiled expected production to surge by 6.0% in September. Their forecasts have been consistently too optimistic in recent months but the August loss, at a minimum, should be regained.

China has the largest weight in the G7 plus E7 aggregate and reports September production on Tuesday 21 October. Recent output growth has been lower than suggested by official and Markit manufacturing purchasing managers’ surveys, while a rise in September exports is hopeful.

*All numbers seasonally adjusted. Own adjustment of Russian / Polish industrial output and German car output using X12.

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