OECD CLIs point more firmly towards an upcoming peak in growth

The OECD Composite leading indicators (CLIs), designed to anticipate turning points in economic activity relative to trend, continue to suggest that economic growth in the OECD area as a whole may reach a peak in the coming months.

The latest CLIs reaffirm last month’s assessment which showed signs of a possible upcoming peak in the growth of economic activity in the United States, Japan, Germany and the United Kingdom. Similar signals have now emerged in Canada and the euro area as a whole, including Italy. However, in France, the CLI is pointing to a continuation in growth, albeit at a moderating pace.

Among major emerging-market economies, the CLIs continue to anticipate growth losing momentum in China (industrial sector). In India, the CLI indicates stable growth while in Brazil, the outlook continues to deteriorate with the CLI now contracting to below trend levels. By contrast, the CLI for Russia continues to point to a steady increase in growth above long-term trends.

The OECD composite leading indicators, which include order books, building permits, confidence indicators, long-term interest rates, new car registrations and many more, are cyclical indicators designed to anticipate fluctuations in economic activity over the next six to nine months. They paint a broad picture of economic activity based on a large amount of recent forward-looking data.

Persisting uncertainties stemming largely from recent developments in the ongoing COVID-19 pandemic may result in higher than usual fluctuations in the CLI and its components. As such, the CLIs should be interpreted with care and their magnitude should be regarded as an indication of the strength of the signal rather than a precise measure of anticipated growth in economic activity.

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