OECD leading indicators

The OECD monthly leading indicator indices, published February 14th, point towards a sustained progression of the economic activity in the coming months in the member countries of that organism. Greece is the only OECD country where the index of leading indicators lets believe to an economic growth inferior to the long term historical trend, if there is growth. For most of the OECD countries, the scenario is one of acceleration of the expansion or one of moderate growth.

For the principal emerging economies non member of the OECD, the evolution of the composite leading indicators suggests a growth slowdown in China and India, an acceleration of the expansion in Russia and a growth close to the long term historical trend in Brazil.

Four countries are added from now on to the thirty-five for which the OECD publishes composite leading indicators : Chili, Estonia, Israël and Slovenia.

 

Canada : pronostic of moderate growth in the coming months

The leading indicator index for Canada continues to grow at a moderate pace. Since last May, the index trend announces a compression of economic growth, and January results, published today by Statistics Canada (SC), are no exception. The manufacturing sector components of the index contribute significantly to its slow pace of growth, but that sector could benefit from the acceleration of the expansion in the United States in 2011, although this is not yet visible in the manufacturers book orders for which data were also released today by SC.

The growth outlook for Canada in 2011 reflects well the recent evolution of the leading indicator index. The IMF forecasts economic growth of 2.3% in Canada this year, compared to 2.9% in 2010. The Bank of Canada forecast is at 2.4%, with a slight acceleration of the pace of growth at mid-year. The Economist pool of forecasters has estimates of GDP growth for Canada ranging from a low of 2.0% to a high of 3.2%, the average being 2.6%.

Japan : difficulties in assessing a clear trend

Again, Japan short term economic outlook is  difficult to assess when using the leading indicator indices. On February 10th, the Conference Board indicated that its index for that country decreased in December (-0.4%), continuing a trend that has been going on for many months. To the contrary, on February the 7th, the Cabinet Office of Japan released its preliminary evaluation of its leading indicator index, and it showed in December a second increase in a row. Let see, on February the 14th, what the OECD will report from its composite leading index on Japan. See the update at the third paragraph.

Nonetheless, 2011 will be a year of slow growth for Japan. In its January update of its World Economic Outlook, the IMF forecasts a GDP growth of only 1.6%. Growth estimates from The Economist most recent pool of forecasters go from a low of 0.8% to a high of 3.1%, the average being 1.5%. Remember that economic growth in Japan in 2010 is estimated at between 4% and 4.5%, after a contraction of 6.3% in 2009.

Update : Japan Cabinet Office (CO) indicated on February 14th that economic growth in 2010 is estimated at 3.9%, and that the fourth quarter showed a contraction of 1.1% (annualised) of the economic activity. It published also on February 17th the complete version of its monthly leading indicator index, and it confirms that the index increased in December for a second month in a row; it lets believe to a return to growth in the first quarter of this year. The evolution of the CO leading index since last spring allowed us to anticipate the slowdown in economic activity at the end of last year. The OECD monthly leading index for Japan did not announce the contraction in the last quarter of 2010, and the data released on February 14th by that organism allow to maintain a pronostic of economic expansion in the coming months. The Conference Board leading index anticipated the slowdown but it still does not show a return to significant growth in the coming months.




 

New positive signals for the world economic outlook

Purchasing manager surveys conducted in January showed new positive signals for the world economic outlook according to the JP Morgan Global Composite Index. New orders increased significantly for both the manufacturing and service sectors. The results of those surveys, especially the new orders, are often used as a component of leading economic indices.

The JP Morgan GCI are based on answers from 11,000 purchasing managers from almost 30 countries representing 83% of global GDP.

Details at : http://www.markiteconomics.com/ 

Is the Baltic Dry Index reliable as a leading indicator?

To know more about that subject, I recommand David Berman comment of February 3 in his blog from The Globe and Mail :

http://www.theglobeandmail.com/globe-investor/markets/markets-blog/baltic-dry-not-what-it-used-to-be/article1893359/

David refers to an article from Liam Denning published on The Wall Street Journal Internet site.

Quebec : a brighter economic outlook

Last summer, the leading economic index from Desjardins for the Quebec economy announced a weak growth or even a stagnation, and, unfortunately, it did happen. From July to October, Quebec GDP decreased slightly three months out of four, showing an increase only in August according to data published by the Institut de la statistique du Québec.

Today, Desjardins released the most recent numbers on its monthly leading economic index and it increased significantly in December (1.0 percent) for a third month in a row; data for October and November were revised slightly upward. Add that the world economic outlook is improving, especially in the United States, and that the canadian economy, as a whole, the main market for Quebec production of goods and services, is expected to show a moderate growth in 2011, then the conditions are there for a brighter economic outlook for Quebec in the coming months.