Canada : leading indicators

The index of leading indicators published today by Statistics Canada leads to think that economic growth in Canada will be less than anticipated in the coming months. The index increased by only 0.3 % in November, the same rate as in October. Its recent evolution suggests a growth downturn. Last October, the Bank of Canada predicted a growth of 2.6 % in the first quarter of 2011 and 2.3 % in the second, which today seem optimistic.

OECD leading indicators : the pace of economic expansion will be stable

The OECD published yesterday (December 13) its most recent leading composite indices for 29 of its member countries and six other countries of which China and India. The pace of economic expansion should be, in the coming months, at a level superior to the long term trend in most countries. The only exceptions are New Zealand and Brazil where the trend is to a slowdown, and the Czech Republic and Greece where, after a slowdown, the recent evolution of the leading indices is to a slight recovery in the coming months.

Japan is an enigma. The OECD index points towards a stable pace of expansion, while the leading indices of the japanese government and of the Conference Board send signals of weaker economic growth.

People interested to see the evolution of the OECD indices by specific countries can visualise graphs and data at : http://www.oecd.org/department/0,3355,en_2649_34349_1_1_1_1_1,00.html
 

Leading Indicators : December 6 to 10

Leading indicator indices published recently by the Conference Board (CB) point towards moderate growth in the United Kingdom, a slight improvement of the perspectives for South Korea and a growth slowdown for Japan. The Cabinet Office index of leading indicators gives the same trend than the CB one for Japan's economy. Moreover, the consumer confidence index in Japan decreased in November for a fifth month in a row.

For the United States, the weekly leading index developed by the Economic Cycle Research Institute keeps showing a gradual increase, which means an improvement in the economic conditions in the coming months. The most recent CB forecast for the USA sends a cold shower : it indicates a significant growth slowdown in the next quarters. For 2011 as a whole, growth would be only 1.7 %, compared to 2.8 % in 2010. Not all  forecasters share such a pessimism : the different organizations that are part of the poll of forecasters consulted by The Economist (December 11 edition) have a range of forecasts that go from a low of 1.5 % to a high of 3.2 %. December 27 update : after the adoption by the US Congress of expansionary fiscal measures, the CB forecast for GDP growth in 2011 was revised upward, going from 1.7 % to 2.3 %.

In Canada, housing starts increased in November compared to October, but the trend remains downward. Then, the residential construction industry will not contribute to economic growth in the coming months. More globally, the Bank of Canada expressed again its worries concerning the evolution of consumers debt in Canada and sovereign debt in many countries, and the consequences of their eventual deterioration on the economy. The Desjardins Leading Index for Quebec increased significantly in October after months of quasi-stagnation. A few more months of increase will be needed to conclude at an improvement of the perspectives.

In China, the People's Bank ordered, for a third time in five weeks, an increase in the banks reserves to limit the growth of credit and decrease inflation pressures. Also, for the same purpose, an interest rate increase is expected in the coming days or weeks.

Stock markets indices around the world increased during the week supporting again, as leading indicators, the perspective that the world economy should keep expanding in the coming months. Seventeen of the twenty two most followed indices showed an increase.

During the coming days, leading indicators indices will be published by the OECD, Statistics Canada and the Conference Board (USA and China).

Japan : additional signs of weakness in the economy

Sky is darkening over Japan's economy. Leading economic indexes, published December 7 by the Japanese government and the Conference Board, point towards an important slowdown in economic growth. Yet, third quarter results were good : GDP increase of 3.9 % (annual rate). But, the government leading indicator index is down in October for a fourth month in a row; the Conference Board leading economic index decreases also for a fifth month in the last six.

Details at : http://www.cao.go.jp/index-e.html
                http://www.conference-board.org/data/bcicountry.cfm?cid=5

Quebec Index of Leading Indicators

The Desjardins Leading Index for Quebec's economy increased by 0.7 % in October after 5 months of quasi-stagnation. One significant increase after several months of slow growth signs is not sufficient to conclude to a sustained progression of economic activity in the near future, but, at least, it looks better than what was expected from the reading of the index in the summer months.

Details at : http://www.desjardins.com/en/a_propos/etudes_economiques/conjoncture_quebec/indice_precurseur/ipd1012a.pdf

Leading Indicators : November 8 to 12

Twenty of the twenty-two stockmarkets indexes most followed by analysts around the world were down last Friday compared to the previous Friday. It seems that markets reacted to an expected downturn in China and the return of last summer worries related to the financial and economic situation in many european countries. Commodity spot prices were also on the downside. Is it just a pause or the start of a correction after the important increases in market values since early September? Remember that stockmarkets and many commodities, especially copper and aluminum, are proven leading indicators. 

On November 8, the OECD published its leading indicator indices. The most recent results are based on September data. Its press release puts the emphasis on the "diverging growth patterns in major economies". Countries like China and India send signals of a slowdown. It might not be a bad thing taking into account the recent increases in consumer prices in those countries. For the OECD as a whole, the pronostic is "steady growth". 

The Conference Board published its leading and coincident economic indexes for three countries. The outlook is to a downturn in the United Kingdom and South Korea. For Japan, the CB indexes point towards a slow growth, contrary to the OECD leading index which suggests an expansion.

The weekly leading index for the United States developed by the Economic Cycle Research Institute increased at the end of October and early November; on November 5, it was at its highest level (123,9) since May 21 (125,3).

Consumer Confidence indexes were published for the UK and Japan. In both, the downward trend continued in October.

In Canada, CMHC data on housing starts showed that the residential building industry will not support the economic growth in the coming months. In October, housing starts decreased for a third month in a row.

This week, leading economic indexes will be published for China, the United States and Canada. The semi-annual OECD economic outlook will come out on November 18.

Weekly Review, November 1 to 5

The Federal Reserve announced on November 3 its intent to buy government bonds over the coming months for $600 billion thus creating money to support the growth of the US economy. The European Central Bank and the Bank of England prefered, for the moment, not to change their monetary policy. The Bank of Japan maintained its expansionary strategy adopted in early October and, then, will start buying public and private debt in the coming days. The Bank of India and the Bank of Australia decided to increase their interest rates with the objectives of moderating economic growth and inflation. Those decisions, their consequences, particularly on exchange rates, and the world economic outlook will be part of the discussions at the G20 meeting on November 11 and 12 in South Korea.

Stock markets around the world reacted with strong gains to the Fed decision. The DJIA and the S&P 500 surpassed their respective peak of last April. Spot commodity prices increased significantly, more than 4 % in one week according to the TR/JCRB Index. The Fed decision and most of the quarterly results of public firms being known, we can ask ourselves what will drive the markets in the coming weeks.

In preparation to the G20 meeting, the OECD presented on November 3 an abstract from its Economic Outlook. The expansion will continue in the coming months, but at a slower pace than in the first semester of 2010. Non OECD countries, especially emerging markets, will be the main source of growth. The detailed outlook will be published on November 18.

 
Amongst  leading indicators published this week, positive signals came from the purchasing manager surveys of October. New orders for the manufacturing sector and new business opportunities for the service sector pointed towards faster expansion in many countries. New orders in the manufacturing sector  reported to the Census Bureau in the US increased by a little more than 2 % in September showing that the recovery in the production of goods will keep going ahead in the coming weeks. In Germany, new manufacturing orders went down in September, but the annual trend is still up.

In the coming days, I will comment the OECD leading indicators, due out tomorrow, and leading economic indicators of The Conference Board for Japan, South Korea and the United Kingdom. I will look also at the CMHC data on housing starts.