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.
