World Headed For Cyclical Slowdown

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Despite the U.S. leading economic indicators appearing healthy, the global economy appears to be headed for a slowdown, with only 34% of the 40 countries we track having leading economic indicators (LEI’s) signalling growth ahead, and the actual GDP-weighted Global LEI growth now below zero (click any image to enlarge):

world lei

The specific country details are displayed below:

world composite lei

The European countries, representing some 25% of world economic output have taken a decidedly worrisome turn:

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euro area lei

Many of these LEI’s include sentiment data, and its probably a fair assumption to assume that the “trade wars” talk doing the rounds of late have a big part to play in these negative future growth projections.

Whilst the RecessionALERT U.S. Leading index is currently looking robust, we cannot ignore the fact that there is a not-insignificant 40% correlation between the movements of the U.S. LEI and the Global one. In fact, a visual inspection shows that downturns in the Global LEI invariably always lead to downturns in the U.S. LEI:

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oecd us lei

This correlation by no means implies a US recession, but it undoubtedly is likely to put downward pressure on the U.S. LEI in the coming months.

It is early days for the co-incident data and no significant signs of a slowdown can yet be witnessed among them. To this end, here is an interesting chart of country GDP growth from 1Q2017 to 1Q2018:

global gdp


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