OECD LEIs Mostly Creep Higher in September

The OECD 7 and U.S. LEIs each gained 0.1% in September. Europe’s Big 4 and Japan were both flat. Asia’s Major 5 gained 0.1% in September. Progressive annualized growth rates calculated for these countries/regions from the normalized indicators show gathering strength for the OECD 7, Japan, and the United States. Asia’s Major 5 are on the cusp of progressive acceleration and should probably not be excluded on a technicality because their 3-month and 6-month growth rates are so much stronger than other regions even if the 3-month pace is a tick slower than the 6-month pace. And, only Japan and Asia’s Major 5 have queue standings of their LEI levels (top panel) that are above their historic medians (above a rank of 50%). The OECD 7, Europe’s Big 4 and the U.S. all are in or at the border of their bottom third rankings on the amplitude-adjusted level assessment.

Gaining traction... Recalibrating the ranking for growth rates of LEI measures, rather than ranking on levels, shows a 91.4 percentile rank standing for China, a 74.7 percentile ranking for the U.S., a 68.2 percentile standing for OECD 7, and a 64.7 percentile standing for Japan. Only Europe’s Big-4 grouping is below its median value. These are ranked on six-month growth for data back to mid-1999. All the six-month averages are gaining and the changes over six months on LEI levels also show gains across the board. The OECD prefers to assess its LEIs over six-month periods. On that basis, the LEIs are broadly GAINING TRACTION.

Amplitude adjusted assessments- The third panel of the table shows ratios to trend for the LEIs on an amplitude-adjusted basis. Only the U.K., Japan, and China are consistently above 100 indicating above normal expansion. The LEI level standing shows above median performance for the U.K., Japan, Germany, France, and China.

Developing economies ranked on data back to 1996 show only China and Mexico with above-median standings. However, month-to-month all are stronger or unchanged except for Turkey where the LEI fell by 0.3% m/m. Turkey and South Africa show sequential weakness over 3 months, 6 months and 12 months, but only Turkey shows progressive deterioration. China shows consistent exceptional strength. Mexico and South Korea show general progressive strengthening. Only Turkey and South Africa show a weak ratio of the LEI to the value of 6-months ago. All are weaker than 12-months ago except China and Mexico.

Summing up On balance, the OECD LEI data paint a more solid and encouraging picture of evolving global growth than the PMI data we have seen. Real weakness is present in only a few countries or regions. There is a good deal of slow growth and some faster growth and speeding up as well- but more positive news overall. The OECD report is more encouraging than expected.