Earlier this year it was tempting to dismiss surging growth rates in industrial production as merely the result of base effects from last year’s lockdown, but it’s now clear that output is outstripping its pre-pandemic levels.

Industrial production grew 9.7 percent from a year earlier in September, down slightly from 10 percent in August, and well below its April peak of 22.7 percent — where the base effect was indeed dominant. But manufacturing increased 11.5 percent from a year earlier, an acceleration from 6 percent in August.

One thing that’s become more apparent as we look back on the pre-pandemic period was that the economy entered last year’s crisis in a weaker cyclical position than we perhaps realised at the time. Industrial production contracted an annual average of 0.7 percent in 2019 after expanding 1.6 percent in 2018 and 3.9 percent in 2017. Manufacturing grew 0.9 percent in 2019, but that also was less than previous years.

So the pandemic has blown a wind in the sails for industry and manufacturing. Manufacturing output was 8.6 percent higher in September than it was in February 2020, the last month before the first lockdown.

This confirms what is showing up in the survey data like the manufacturing PMIs and industrial confidence indicators, which are currently near highs not seen since before the global financial crisis.

Interestingly, the biggest run-up has come in manufacturing of capital goods:

Nick @MacroTragedy

Greece, Major Industrial Groupings - Production Index (12-month MA, re-based to 2020M01 = 100) --> surprisingly enough, it's Capital Goods that's leading the charge here

November 10th 2021

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