“As before, I’m not certain that looking exclusively at industrial production is quite valid, for industry is a smallerprotion of he global economy than it was 70 years ago. Or at least I think it is. Worth weighting the numbers to reflect the sectoral shift at least, no?”

I would certainly not disagree with the last point. I mean I would like to see someone do it. The thing is, as a one man band – rather than a bank research department, or a think tank etc – there are limitations on what you can do, so you have to go for the jugular as it were.

Really, since the economies I am arguing are likely to be the worst affected in what we can at least call “the long recession” (see my latest post on Russia) – Japan, China, Russia, Germany, Ukraine and Spain – all have quite a significant level of industry dependence (except Spain, but then Spanish services are now neck and necking it with Spanish industry), then I don’t think manufacturing is such a bad proxy for what I want to look at, which really is the size of the hole that has just been blown in the side of the ship.

I will be explaining more of the story as I see it soon, but undoubtedly industry feeds through to services via employment, and this is the aspect we should now be looking closely at, since if all these industries shed a lot of workers in Q1 2009, then we will get another round of industrial contraction on the back of it, and that is when things will get really tricky if they haven’t managed to “un-seize” the credit spiggots by then.

The thing is Tim, since everyone will need to reduce CA deficits and export now (but who will be buying, aha) industry is about to become more important than it has been in recent times (as is agriculture if food prices continue to trend up after the recovery) as areas like financial services and construction are pruned back somewhat.

Basically, I am relying on an old macro economists prejudice about the structural importance of industrial activity when all the froth is stripped away from the rest. It’s a hunch. I’m playing it, and the proof of the pudding will be in the eating, although up to now I ain’t doing too bad, if I may say so, since the German and Japanese economies folded right on cue as far as my forecasts went, Spain has turned out to be a nightmare, and the focus of the current global financial crisis has moved to the East of Europe, just as I was anticipating on all those Eastern Europe blogs.

And at the end of the day, if you look at the manufacturing PMI/GDP for Japan, as I say in the post, it ain’t half bad, mom.

But if you still aren’t convinced, well we will have the JP Morgan Global Services and Composites out next week, though I personally haven’t the time to go drilling them down to country level as I am willing to do for manufacturing, I’ll leave that to someone with a different hunch.