The pullback in demand for consumer durables and investment was reflected in a steep 13 percent fall in global industrial production between September 2008 and March 2009. Virtually every country that reports production data witnessed a sharp fall in output, and a wide range of countries are reporting capacity utilization rates below 70 percent.
Two groups of economies have been hardest hit: those specialized in investment, high-tech goods, and consumer durable goods; and those with large current-account deficits.1
At the country level this is reflected in sharp declines in industrial activity in countries, like Japan and Germany, that specialize in the production of investment goods.
Economies in Europe and Central Asia were also hit hard, both because their industrial sectors tend to be closely tied to high-income Europe and because the drying up of international capital flows (see chapter 2) has forced many into an even sharper domestic downturn.
1 Econometric evidence suggests that a 10 percent rise in capital spending in developed countries will elicit a 6.6 percent increase in global manufacturing output. Country sensitivities vary, with stronger links in the United States, and the Republic of Korea (both with elasticities of 2.1), Singapore, and the Central European countries (1.5).
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