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Economy in Brief
Chicago Business Barometer Declines Sharply in February
The ISM-Chicago Purchasing Managers Business Barometer fell 4.3 points in February to 59.5...
Goods Trade Deficit Widened Slightly in January
The advance estimate of the U.S. trade deficit in goods widened slightly to $83.74 billion in January..
Japan's Industrial Sector Mounts a Comeback
Japan's IP surged in January gaining 4.3% compared to December...
Aircraft Orders Boost U.S. Durable Goods Orders in January
Manufacturers' orders for durable goods increased a much larger-than-expected 3.4% m/m (4.5% y/y) in January...
Kansas City Fed Manufacturing Index Increases Again in February
The Kansas City Fed reported that its manufacturing sector business activity index rose to 24 in February...
Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
by Tom Moeller November 11, 2005
The modest 0.2% increase in the September Leading Index of the Major 7 OECD economies marked the fourth consecutive gain and it improved the leaders' six month growth rate to 1.1%, the best in twelve months.The increase reflected improvement in Japan & Europe but declines in North America.
During the last ten years there has been a 68% correlation between the change in the leading index and the q/q change in the GDP Volume Index for the Big Seven countries in the OECD.
The leading index for Japan jumped 1.0%, the most for any month since early 2002, as share prices increased and the interest rate yield spread widened. The six month growth rate surged to 2.3%, the best since early 2004, and its correlation with real growth in Japan has been a meaningful 42% during the last ten years.
Leaders in the European Union (15 countries) rose for the fourth month and the 0.5% increase lifted the six month growth rate to 2.3%, the highest in a year. During the last ten years there has been a 60% correlation between the change in the leading index and the q/q change in the GDP volume index for the European Union.
German leaders increased for the fifth consecutive month. A 0.5% gain raised six month growth to 3.3% as new orders bounced back from an August drop and the business climate improved. The correlation between the leaders and the change in the German GDP volume index has been a low 19% during the last ten years.
The French leaders rose for the third consecutive month. The 0.5% increase pulled the six month growth rate into positive territory for the first time since March with a 0.3% growth rate and the correlation between the leaders with growth in France's GDP volume index has been a higher 43% during the last ten years. The Italian leading index showed perhaps the most meaningful monthly improvement with a 0.8% gain that followed an upwardly revised 0.9% August increase. The six month growth rate improved to 1.9%, the best since early 2004, although its correlation with GDP growth has been a low 0.9% during the last ten years.
The UK leaders increased just 0.1% but it was the fourth rise in as many months. The gain raised the six month growth rate to 0.2% and its correlation with real GDP growth has been 29% during the last ten years.
The U.S. leaders fell for the second consecutive month and the 0.3% decline lowered the six month growth rate to 0.3%, the worst since May. The correlation between the leaders and real GDP growth has been a high 58% during the last ten years. The Canadian leaders also fell and the 0.5% decline dropped six month growth to -1.0%. The leaders' growth also has been highly correlated with Canadian real GDP growth, to the tune of 49% during the last ten years.
The latest OECD Leading Indicator report is available here.
What Caused The Great Moderation? Some Cross-Country Evidence from the Federal Reserve Bank of Kansas City is available here.
OECD | Sept | Aug | Y/Y | 2004 | 2003 | 2002 |
---|---|---|---|---|---|---|
Composite Leading Index | 102.51 | 102.31 | 0.6% | 102.03 | 97.59 | 96.30 |
6 Month Growth Rate | 1.1% | 0.8% | 3.5% | 2.6% | 2.2% |