The OECD's leading indicator indices for November signal a short-term upswing in global industrial momentum, validating a forecast made last July on the basis of monetary developments. The improvement, however, does not extend to the beleaguered EMU-periphery.
The chart shows six-month changes in combined industrial output and a leading index for the group (i.e. Italy, Spain, Portugal, Greece and Ireland) together with a "leading indicator of the leading index", which heralds turning points. The six-month decline in the index accelerated further in November and the double-lead indicator has yet to signal a bottom.
This weakness is consistent with an ongoing contraction of real narrow money discussed in a previous post.
These developments suggest that the recent fall in EMU-periphery industrial output will gather pace in early 2011. Economic weakness is likely to undermine fiscal consolidation plans, in turn ensuring that the sovereign debt crisis rumbles on.
