The latest OECD report of composite leading indicators (CLIs) show that the global recovery shows signs of stalling. Note that CLIs do not reflect current business activities. They are aggregates of leading indicators that attempt to indicate turning points in economic activity approximately six months in advance.
Recent high-frequency indicators point to a slowdown in the pace of recovery of the world economy that is somewhat more pronounced than previously anticipated. Against this background and according to the OECD short-term forecasting models, growth could slow in the G7 economies to an annualised rate of about 1½ per cent in the second half of the year
So here's how I see it: what we're really seeing here is a sort of intellectual Wile E. Coyote moment. Back in May, the OECD was responding to social pressure, not economic logic. All the right people wanted austerity now now now, because, well, because, and the OECD went along. Now a bit of bad economic news has led the organization to look down, and realize that there's nothing supporting its position. But there never was.
From the press press release:
OECD composite leading indicators show signs of possible peak in expansion OECD composite leading indicators (CLIs) for July 2010 point to clearer signs of a moderation in the pace of expansion compared to last month's assessment. The CLI for the OECD area decreased by 0.1 point in July 2010.
In Canada, France, Italy, the United Kingdom, China and India there are stronger signals of a slower pace of economic growth in coming months than was anticipated in last month's release. Stronger signals that the expansion may lose momentum have emerged in Japan, the United States and Brazil. Tentative signals have also emerged that the expansion phases of Germany and Russia may soon peak.
The OECD Development Centre's Asian Business Cycle Indicators (ABCIs) show that the recovery of ASEAN economies keeps on track with some signs of moderation.
Here are some charts, showing coming peaks in major sections of the world economy, and even a downturn in China:
Taking a look inside Europe, there are very similar downturns coming in Britain, France and Italy. I present Britain as an example of all three:
OTOH, Germany is still expanding:
As is Russia, but much more weakly:
While Japan and Brazil may soon be peaking:
While India and Canada shows signs of a coming downturn:
This certainly does not bode well for us in the US, given the degree of global economic integration we now [share and] "enjoy". But if this does bring the Wiley E. Coyotes back down to earth, at least the dark cloud really does have a silver lining.
