Global leading indicator up again, with EM component contributing
Simon Ward
2 Comments
As expected, the global longer leading indicator followed here rose further in March, consistent with the forecast that economic growth will strengthen over the summer after a lull in early 2014.
The leading indicator is designed to provide advance warning of turning points in global* six-month industrial output growth. Its lead time has averaged 4-5 months in recent cycles. The indicator fell between July and December 2013, signalling that industrial momentum would reach a peak in late 2013 and moderate in early 2014. The peak occurred on schedule in November-December, with growth slowing through March – see first chart.
The recovery in the indicator since December suggests that industrial output growth will bottom in April-May and rise through July-August (at least). This is consistent with monetary trends: global real narrow money expansion increased between November 2013 and February-March 2014 and usually leads the economic cycle by about six months.
The rise in the global indicator reflects improvements in both the G7 and E7 components. The latter runs counter to a widespread view that economic risks in emerging economies are rising, but fits with a recent modest revival in E7 real money expansion – second chart.
*Global = G7 developed and E7 emerging economies.
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Reader Comments (2)
Hi Simon,
Thank you for a great website which honestly tries to answer the really hard questions: where is the economy going and where are markets going?
But I'm puzzled by your statement that "the global longer leading indicator followed here rose further in March".
When I look at the OECD database and press release it shows that, in March (the most recent month for which data has been published), the Leading Indicator dropped slightly for the G7 (continuing the pattern of slight drops since January) while Brazil, China, India and Russia all showed March drops (continuing the pattern set in late 2013).
Am I missing something or are you tracking some variant of the OECD Leading Indicators?
Thanks and regards,
Cormac Lucey
Thanks Cormac. I transform the OECD data to create indicators that signal turning points in growth (rather than output relative to trend). The longer-term indicator incorporates an additional modification to increase its lead time.