Global IP growth was zero on a 3m basis in May and the 4.5pp slowing in the IP growth rate since January was quite large and only slightly smaller than the slowdowns in the springs of 2010 and 2011. Of note, IP growth in June looks to have ticked up with global manufacturing new orders pointing to further potential upside.
Additionally, continued solid consumption driven by the US and Europe and strong services PMIs should lead to an eventual demand-driven turn in production and trade. Global trade collapsed in Q1 amid disappointing consumption and US port strikes, but export volumes have rebounded since March back to peak levels.
Trade is important because it provides an external stimulus for economies that may need an extra boost to growth. Finally, the Baltic dry index, which many had cited as a signal of weakness in global growth, has rebounded since June and points to a better backdrop for trade and IP.
"The bottoming in production and trade should help alleviate some pressure on commodities and other growth-linked assets. The rebound in global trade should also get a further boost from lower oil as lower shipping costs (and weaker currencies) encourage trade volumes", says Barclays.
