OECD LEIs Show Very Modest Gains in January

Developed economy trends The OECD leading indicators for January show slight increases of 0.1% for the OECD Major 7 members. Japan shows a flat performance. The United States shows an increase of 0.1%. All of these top-of-the-table metrics are month-to-month changes. They follow identical month-to-month changes posted in January and December for each country or grouping.

Annualized growth rates for these metrics show growth rates over 12 months, six months and three months that reveal acceleration for the OECD 7 group as the 12-month growth rate is -1.9%, the six-month growth rate rises to 0.8%, and the three-month growth rate is a slightly-improved 1.0%. Japan logs negative growth rates for all three periods, but its three- and six-month growth rates are less weak than its 12-month growth rate. The U.S. shows acceleration with the 12-month growth rate at -1.9%, a six-month growth rate of 1%, and a three-month growth rate of 1.3%. The far-right hand column ranks these three OECD units on their index levels; all three regions stand below their respective medians which means they have rankings below the 50th percentile on data back to late-1999.

The OECD prefers to view the signals of its indicators over six months. The next panel on the table looks at changes in six-month averages. On this metric, six-month growth rates from six months ago, are positive for the OECD 7, for the U.S., and for China, while Japan posts a flat performance on this measure in January after rising in December. Sequential growth rates are presented to the right for six-month periods on a point-to-point basis for nonoverlapping rates of growth. The OECD 7 shows accelerating results. Japan shows mixed results. U.S. growth rates show acceleration and Chinese growth rates show acceleration. China’s growth rates are in sync with those from the U.S. The right-hand column offers percentile standings against six-month growth rates for data back to 1999. Each of the OECD metrics shows a standing above its median (which occurs at the 50% mark) except for Japan that has a 45.5 percentile standing. Japan scores as weak when the data are applied using different methods.

The bottom panel in the table presents levels of the OECD LEIs. The level ‘100’ represents normal growth; anything below 100 represents sub-normal growth. The table shows subnormal growth indicated everywhere except in the U.K., Japan, and China. However, the ratio of the current indexes to their value of six-months ago shows improvement everywhere except Japan; only France, the U.K., and China in this lower panel have queue standings for the LEI indexes above their respective medians (50% ranking).

On balance, the OECD indicators in January show some mild improvement underway with LEI indexes at weak levels but beginning to grow at a faster pace.

Developing economies Developing economics show consistent slowing tendencies for about 38% of the reporters in the table (3 of eight) – mostly Indonesia, Turkey, and South Africa. The metric for the level of the index also pulls India into the mix of weak countries and brings the strong/weak mix to 50%. Looking at growth through the lens of the ratio of the index to its value of six-months ago, Indonesia, Turkey, South Africa, and Mexico come up short and show slow growth in progress. The rank percentiles on the index values back to 1996 show only China, Brazil, and South Korea with index level rankings above their historic medians on this timeline.

The average developing country ranking is 62.5%, but the median ranking is 45.7%. The average is considerably boosted by the singular strength of the index in China; the median is a better description of the conditions of the group as a whole. There are considerably mixed conditions among developing countries, but most of them show growth, half of them are underperforming, half are stronger than they were six months ago. On balance, there is more improvement than deterioration, but there is not much evidence of compelling growth among the group. China outperforms everyone else despite its recent problems. Apart from China, most growth is mediocre, weak, or backtracking.