The good news, analysed better

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: Signs of recovery are visible in nearly all the macro economic indicators that we monitor. Industrial production, imports, exports and credit conditions have improved in the most recent data.

Since the recovery is recent, the interesting question today is: how does recent behaviour of economic variables today compare to the last few months after the crisis? For examining the most recent behaviour of an economic series we need to look at the month-on-month growth rates. Such growth rates would be able to tell us whether July was better than June. However, like many other economic series, all of these have seasonality. We, therefore, adjust the monthly data for seasonality before analysing the annualised month-on-month growth rate. However, one observation does not make a trend. The figures, therefore, report the three months growth rate of seasonally adjusted exports. Despite some volatility, the acceleration in these series is evident. Further, in all cases the acceleration has been seen for a few months now, suggesting that it may not just be a blip (http://www.mayin.org/cycle.in).

Figure 1 shows the growth rate of the Index of Industrial Production. As seen in the picture, the peak was in the first half of 2006. The slowdown from high levels of growth of 10 to 15 per cent had set in even before the global crisis. The crisis in 2008 made the slowdown much worse pushing it into negative territory, that is, actually a shrink in the level of output almost for the first time. While this happens in developed countries which normally have much slower growth rates, in developed countries we normally witness a cycle around a trend growth rate. A decline in output is almost unknown. This scary period now appears to be behind us and we can see a recovery in the month-on-month growth.