What the OECD’s Composite Leading indicators are saying about the Global Economy

January 17, 2013 in Economy

The Organisation for Economic Co-operation and Development (OECD) has developed country-wise “Composite Leading Indicators” (CLIs) that are used to determine changes in economic cycles, relative to a mean trend.

These are useful signals that can provide advance alerts about the state of a country’s economy.

Methodology

The OECD’s is a qualitative approach that classifies short-term economic movements into four cyclical phases, as shown in the figure below.

The OECD uses a large number of components series based on a variety of economic indicators that respond quickly to changes in economic activity, quantify production and provide insights into future activity, in its construction of CLIs.

Coverage

The CLIs are computed across four major groups: the G-7 area, the Euro area, the major five Asia area and the OECD total area.

The latest analysis

The OECD’s latest release dated January 14 says its composite leading indicators point to stabilising economic growth in most of the major economies.

CLIs pointing to “weak growth:”

  • Russia
  • Canada

CLIs pointing to “tentative turning point:”

  • China
  • India

CLIs pointing to “stabilising growth:”

  • Euro Area
  • Major Five Asia
  • France, Japan, Germany, Italy and Brazil

CLIs pointing to “growth firming:”

  • OECD Area
  • Major Seven
  • UK and US

Here is a graphical look at some of the key areas.

Looking at these graphs, the United States appears to be making the best efforts at economic recovery judging from the way its graph is bouncing off the 100 median level.

China is also turning from an inflexion point and may soon be crossing over across the long term trend line, if the initial turning point is confirmed.

 

 

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