The forecast here of stronger global growth during the second half of 2015 suggests that business surveys will shortly turn more upbeat. Equity analysts’ earnings revisions correlate with survey trends and are improving on schedule.
The earnings revisions ratio is the number of analyst earnings upgrades minus downgrades, expressed as a proportion of the total number of estimates. The global revisions ratio (i.e. covering the constituents of the MSCI World index) rose to its highest level since December this month, an improvement that may be echoed in Markit “flash” manufacturing purchasing managers’ surveys released on Thursday – see first chart.
Yesterday’s post noted that monetary trends in China are signalling a modest growth revival. The Chinese revisions ratio also strengthened in May – second chart.
The upturn in the global longer leading indicator calculated here – see previous post – is corroborated by an alternative indicator compiled by the New York-based Economic Cycle Research Institute (ECRI). Its website commentary states that “the long leading index has turned up, and the coincident index is starting to follow suit, with the revival being led by economies where exchange rate weakness is acting as a tailwind (Japan and the Eurozone), while being less evident in the US where dollar strength is a headwind” – see here.
