The Shape Of Things To Come?

Italy is officially in recession:

Italian first quarter GDP fell 0.5 percent from the previous three months and shrank 0.2 percent year-on-year, the statistics institute ISTAT reported on Friday, confirming its preliminary estimate issued on May 12.

The 0.5 percent quarterly fall was the worst since Q4 1998, whilst the 0.2 percent drop on a yearly basis was the worst since Q1 1997.

As in the previous quarter, the q/q result was hit by weak exports, which declined 4.1 percent. Net exports subtracted 0.5 percentage points from q/q growth and 1.3 percentage points from y/y growth.

Consumer spending rose by 0.1 percent q/q and 0.2 percent y/y, while gross fixed investment fell by 0.1 percent q/q and 0.2 percent y/y.

Meantime industrial production in India continues to grow nicely:

India's industrial output rose 8.8 percent in April compared with a year earlier, helped by robust growth in manufacturing, data from the Central Statistical Organisation showed on Friday. Year-on-year growth in March was revised up to 8.78 percent.

India's industrial output is a key source of growth in Asia's fourth-largest economy and has been rising since a bumper monsoon in 2003 boosted farm output and rural incomes.

Manufacturing production, representing more than 75 percent of industrial output, rose 10.0 percent in April from last year.

Production of consumer goods was 18.6 percent higher in April than a year earlier after a rise of 7.5 percent in March. Production of capital goods was up 24.5 percent in April.

A strong manufacturing sector pushed economic growth to 8.5 percent in the fiscal year ended March 2004, the strongest expansion in nearly 15 years. Growth in 2004/05 is expected to have been 6.9 percent, and the central bank is projecting expansion of 7.0 percent in the current financial year.

I think it would be a mistake to think that this decade's big story is only about China. The other interesting issue is that these differing growth paths are not cyclical, they are secular and structural. One part of the world is in decline, and the other is waking up.