Record-High Global Production

While the central bankers are increasingly getting most of the credit for the current bull market in stocks, let’s not forget that workers are still going to work and managers are still managing their businesses every day. Central banks have responded to slow global economic growth by flooding the global economy with liquidity. Business managers have responded by working harder to bolster their revenues, to cut their costs, to increase their productivity, to boost their profit margins, and to grow their earnings. A recession is always a good excuse for not doing any of these things beyond slashing costs. In a slow-growing business environment, there are no good excuses for not at least trying to do better.

On a global basis, all these efforts continue to pay off in growth, albeit slow growth. However, it is mostly slow growth to record-high territory. Consider the following:

(1) Global industrial production. Global industrial production (excluding construction) rose 2.0% y/y to a new record high during May. That’s not much growth, but it has a positive sign rather than a negative one, and it is happening in record-high territory.

(2) Advanced vs. emerging economies. I am not as pleased by the industrial production index for advanced economies. It has been flat-lining for the past couple of years roughly 5.5% below its record high during January 2008.

On the other hand, the index for emerging economies jumped 4.2% y/y during May to a new record high. Production is at or near a record high for the following EMs: Indonesia (up 6.4% y/y through June), China (6.0%, July), Poland (6.0%, June), Malaysia (4.6%, June), Czech Republic (4.6%, June), India (2.3%, June), and Mexico (0.3%, June).