The industrial sector of the world economy – mines, utilities and manufacturers – uses a lot of metals and hence growth in industrial production (IP) is crucial to the health of metals markets. After a poor end to 2015, hopes were raised of a good 2016 by very strong January data (see “Global industrial production roars back in January”). February’s releases, however, have brought a sobering reality check.
Our database of 69 leading industrial countries, which account for about 93% of world output, calculates global IP fell by 0.6% MoM in February, the largest such fall since March 2011. This was sufficient to wipe out three-quarters of January’s increase (fig 1). Most countries saw a MoM decline with by far the largest contribution coming from Japan, followed by the EU, the Philippines and USA. China, India and Korea made a positive contribution (fig 2).
Such a weak February after such a strong January raises questions about the data, and incorrect seasonal adjustment is likely to have played a part in the swings. Seasonal adjustment is difficult between December and February, due to the calendar New Year, Chinese New Year and this year an additional complication from the leap year.
A bit better but not enough to support the commodities rally.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
