Global leading indicator strong but momentum possibly peaking

9-2-2017

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The OECD’s country leading indicators are giving an upbeat message for the global economy in early 2017, in line with an earlier positive signal from monetary trends. The indicators have yet to confirm the suggestion from the latest monetary data that global economic momentum will fade towards mid-year.

The OECD yesterday released December data for its country leading indicators, allowing an update of the global (i.e. G7 plus emerging E7) leading indicator calculated here. Six-month growth of this indicator continued to rise in December. Allowing for an average lead time at historical turning points of four to five months, this suggests that six-month growth of industrial output will remain on an upward trend through April / May – see first chart.



As previously discussed, global real narrow money trends suggest that six-month industrial output growth will peak around May and move lower over the summer. Such a scenario would be consistent with six-month leading indicator growth peaking in December or January. The current monetary and leading indicator signals, therefore, are compatible.

While six-month leading indicator growth rose further in December, a levelling-off of the one-month increase hints that the six-month measure is approaching a top – first chart.

The OECD country details showed broad-based strength. The Chinese leading indicator, in particular, remains upbeat, with both six- and one-month growth rising further in December – second chart.



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