A proprietary leading indicator of global growth derived from the OECD’s country leading indices remained positive but fell further in April, signalling that the current economic slowdown will extend at least through July, allowing for the typical three-month lead – see first chart.

The decline in the indicator confirms an earlier slowdown in global real narrow money expansion, which peaked in November 2011 and typically leads output by six months. Like the indicator, real money growth remained positive but fell again in April, implying no economic reacceleration before late 2012. Real money trends, however, may lift over the summer as inflation slows sharply.

Neither real money nor the leading indicator is yet giving a recession signal – both turned negative ahead of the 2008-09 output slump.

The country detail shows that the US leading indicator has fallen particularly sharply, consistent with more subdued US real money growth since last winter after QE2-related buoyancy earlier in 2011 – second chart. US economic deterioration, in other words, is domestically-driven as well as reflecting spill-over from weakness in Europe and China / Asia.

Growth fluctuations in the current cycle continue to resemble the pattern of the late 1970s, a similarity discussed in several previous posts extending back to late 2009 – third chart. This “template” will break down at some point but suggests that the economy will slow into 2013 while avoiding a recession – broadly consistent with the current signals from real money / leading indicators.