Strong recovery in global industrial production in Q3

Comparison of recovery in industrial production from the month before onset of “recession” highlights a big difference between the experience of the global financial crisis (GFC) and the current downturn caused by the Covid-19 pandemic. ?

Lockdown in many countries caused a rapid and severe slump in industrial production in the early months of the pandemic, but recovery has been surprisingly strong.

A key factor has been the response of governments around the world. Whereas in 2008/2009 the focus was on bailing out the financial system, in 2020 there has been direct fiscal support for businesses and consumers. While central banks have continued to pursue policies to maintain liquidity in financial markets, many of these monetary measures (zero or lower interest rates, bond purchases, etc) were already in place in 2019 to offset looming recession. By channeling cash directly to businesses and consumers governments have, so far, averted an extended slump in demand in 2020 with the exception of the hospitality and travel sectors.

The bank bailout of 2008/2009 led many governments to adopt fiscal austerity in the following years as a means to reduce government indebtedness, prolonging the recession and contributing to the forces inhibiting growth in many countries over the past decade. Real support for the economy in general in 2020, rather than being limited to one sector, is now being paid for by much higher public debt in the near term, but this should mean a shorter and less severe recession than that caused by the global financial crisis. Provided fiscal stimulus is not ended abruptly and then reversed too soon, prospects for growth in 2021 look good.

CHR Metals publishes a monthly commentary, Global IP Watch, covering developments in global industrial production with forecasts for the current and following year. Its unique index is based on the data of 50 countries accounting for over 90% of global GDP.