Tracking The World Economy... - 12/10/2010

OECD Composite Leading Indicator Points To Slower Economic Activities Ahead

OECD composite leading indicator’s 12-month rate of change slowed down to 3.8% in August, from +5.3% in July and the peak of +10.3% in March. This was the fifth consecutive month of easing and the slowest pace of increase in 10 months, indicating that the expansion of the OECD countries’ economies will likely slow down in the months ahead. The slowdown was broad-based, from the US to Canada, UK, Euroland, Japan and major economies in Asia. As a result, the US and Canada’s sub-indices weakened to 5.0% and 0.8% respectively in August, from the corresponding rates of +6.6% and +3.0% in July. This was the fifth straight month of easing for the US’s sub-index, while Canada’s sub-index has been slowing down for six consecutive months during the month. Similarly, the sub-index for the Euroland moderated to 2.1% in August, from +3.6% in July, while the sub-index for UK eased to 1.1% in July, from +2.8% in June. The slowdown in these countries’ sub-indices was particularly sharp, as they were hit by a sovereign debt problem in recent months. In the same vein, Japan’s index softened to 5.1% in August, the fourth consecutive month of easing and from +6.2% in July, suggesting that the Japanese economy will likely head south as well. The sub-indices for China and India also eased to 12.6% and 8.3% respectively in August, from the corresponding rates of +13.9% and +9.0% in July, suggesting that economic activities in these countries are likely to expand at a slower pace going forward. Similarly, the sub-indices for Brazil, Russia and South Africa moderated during the month. As a whole, the readings of the OECD composite leading indicator suggest that the global economy will likely expand at a more moderate pace in the months ahead, in line with our expectation.

Tracking The World Economy...-12/10/2010