Global industrial recovery continues

Industrial production in the Eurozone economy in April rose rose by more than expected (0.8% vs. 0.5%), and data for prior months were revised upwards. In the past year Eurozone industrial production is up 9.5%; Japanese industrial production is up 26%; and U.S. industrial production is up 5.2%. The U.K. economy is the clear laggard, as this chart shows, with production up only 1% in the past 12 months.

To be sure, global industrial production is still well below the highs of 2008, but it is nonetheless expanding at a pace that will eventually lead to a full recovery. All the talk about a double-dip recession is puzzling to me, given that so many regions and sectors of the global economy are still in the process of recovering. With production levels still well below prior levels, the world still has plenty of idle capacity, and this capacity costs almost nothing to tap (it's already built)—so production can rise by a very impressive rate during a recovery and that is what we are seeing in most areas. Rising production leads to more income, more jobs and more spending, and that feeds back into decisions to expand production further. This process is effectively a virtuous cycle that will be hard to derail.