Global leading indicators followed here continue to signal a summer economic rebound but suggest that growth will level off or moderate later in 2014.
 
The indicators are designed to give advance warning of turning points in global industrial output momentum. Short- and longer-term measures are calculated, with average lead times of 2-3 and 4-5 months respectively in recent cycles.

The short-term leading indicator rose again in May while the longer-term measure fell marginally for a second month, following a sharp gain between December and March. The message is that six-month global industrial output growth will rebound from an expected May low but may level off or retreat slightly at the end of the current quarter – see first chart. Note that prior falls in the indicators correctly signalled recent output weakness.

The recent small decline in the longer leading indicator fits with a minor slowdown in six-month global real narrow money expansion since February – second chart. Real money trends typically lead output by about six months.

The level of global real money growth remains consistent with solid economic expansion. The current global reading, however, is reliant on US strength, with real money growth slowing in the rest of the G7 and moderate / trendless across the E7 large emerging economies – third chart. Near-term global economic prospects are positive but faster growth may not be sustained unless non-US monetary trends improve.

*Global = G7 developed and E7 emerging economies.