Economia globaleProspettive > Growth rates of worldwide industrial production

Status of crisis overcoming ten years afterwards

Growth rates of industrial production in countries absorbing 82% of Germany's machine exports

"America is experiencing an economic boom" headlined the FAZ on September 11, 2018. Less than four months later, on January 2, 2019, the FAZ was forced to quote a survey by the Bank of America that "more than half of the investors expect a global economic downturn in the next twelve months". This is in line with our assessment.

February 20th, 2019 - This report reveals the growth rates resp. change rates of global industrial production. Why industrial production in particular? It is the most important economic indicator for the machinery industry and automation technology.  

This report considers countries that accounted for 82% of all machinery exports from Germany in 2017. These are the EU, the USA and Japan (61%), the BRIC countries Brazil, Russia, India and China (15%) as well as the MIST countries Mexico, Indonesia, South Korea and Turkey (6%).

The annual growth rates of the industrialized countries since the overcoming of the global economic crisis are around 1% p.a.

The analysis puts the OECD data to industrial production at 100 for the pre-crisis year 2008, so that the change rates since that time are immediately clear and comparable.  

The following diagram shows at a glance that industrial production in Germany has risen by 8.2% since 2008, in the USA by 7.1%, in the EU by 1.9% and has decreased in Japan by 8% since then.

The course of industrial production in the USA, Germany, the EU and Japan from 2008 to 2018.

Let us differentiate further and identify the year in which the countries concerned had overcome their crisis trough. And growth rates will only be determined from this point until the first half of 2018.

Growth rates of industrial production of Germany, the US, EU and Japan 2008 - 2018.

We can see that the annual growth rates of industrial production after the crisis has bottomed out are 1.0% per year for Germany, 1.0% for the EU, 1.1% for the USA and for Japan 0.1% per year.

The claim of a "buzzing economy" sticks to outdated schemes and does not take into account the structural changes since the year 2000

These figures do not document the "humming of the economy" or the economic upswing that used to be the norm after crises. Rather, the economic and crisis cycle of industrial production in the industrialized countries has changed structurally since 2000, as this magazine has shown.  

Instead of a previously usual economic upswing after crises, an uneven, sluggish overcoming of the crisis has taken place, in which growth, stagnation and setbacks coexist and produce a stagnating or temporarily only slightly growing overall trend.  

The rejoicing of a "humming economy" is merely a mixture of outdated pattern recognition and wishful thinking resp. promotion of a so-called self-fulfilling prophecy. As far as this might have had an effect, it has only taken the indebtedness of the state or central bank, consumers and companies with galloping debt to new heights.

The annual growth rates of the BRIC countries document growth and setback in a range from 9.3% to -1.9%

China's industrial production has more than doubled since 2008, while that of the US has risen by only 7%. This gap is a major cause of the Trump government's aggressive policy toward China in particular. It is about containing China for reasons of competition and the USA's desire to remain the world power number one.

The industrial production in Brazil, Russia, India and China (BRIC countries) from 2008 to 2018.

The annual growth rates of industrial production in India and Russia, at 3.7% and 2.0% respectively, are more than twice as high as in the USA.

Growth rates of industrial production in Brazil, Russia, India and China (BRIC) 2008 - 2018.

If the economy is supposed to be humming there, how much is it humming in these countries or even in China? Brazil's industrial production is shrinking by 1.9% per year.

The annual growth rates of the MIST countries range from 0.8% to 6.4% per year

The chart shows that industrial production in Turkey grew by 68%, in Indonesia by 55%, in South Korea by 30% and in Mexico by 7% from 2008 to 2018.The yearly growth in Mexico is related from 2011 to 2017.

The industrial production in Mexico, Indonesia, South Korea and Turkey (MIST countries) from 2008 to 2018.

Turkey leads the annual growth rates of the MIST countries with 6.4%, followed by Indonesia with 4.5% per year. South Korea with 1.5% and Mexico with 0.8% are on a par with the industrialized countries.

Growth rates of industrial production of Mexico, Indonesia, South Korea nd Turkey from 2008 to 2018.

The galloping indebtedness of state, companies and consumers in the US

The galloping national debt has revealed this magazine as the fourth structural change. In the US it has reached 105% of the GDP. 

The level of debt of the private sector, i.e. companies (banks excluded) and households is at 150% of the GDP as the FED graph below indicates.

Private debts in the US from 1980 to 2018.
Source: Federal Reserve Bank of St. Louis, September 24, 2018,

Debts make it possible to buy now and pay later. Of course, the development of industrial production benefits both from credit-financed purchase of its products and from its credit-financed modernisation and expansion.

Today's enormously increased production possibilities with the help of state-of-the-art technology apparently cannot be absorbed without credit-financed demand. If payments of the purchases today cannot be covered by payments tomorrow due to overindebtedness, the credit chain will crack, a money crisis will break out and production tailored to credit-financed levels will choke on its own oversize - in the form of a world economic crisis.

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