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Economy in Brief

OECD Leaders Rose Further
by Tom Moeller December 12, 2005

The Leading Index of the Major 7 OECD economies posted its fifth consecutive monthly increase in October with a 0.4% increase that doubled the gains of the prior two months. The increase raised the leaders' six month growth rate to 1.7%, the best since August 2004 and gains were broad based amongst countries.

During the last ten years there has been a 66% 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 0.9% after a downwardly revised 0.5% September increase. Share prices and construction rose lifting the six month growth rate to a firm 3.0% and its correlation with real economic growth in Japan has been a meaningful 42% during the last ten years.

Leaders in the European Union (15 countries) rose 0.3%. This fifth consecutive monthly increase raised the six month growth rate to 2.5%. 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 six consecutive month and a 0.7% gain was the strongest since July. The six month growth rate improved to 4.4% as new orders rose to the highest since 1992. 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 increased 0.5% increase and the gain pulled the six month growth rate further into positive territory at 1.5%. Prospects for the industrial sector rose to the best level in a year. The correlation between the leaders' growth and France's GDP volume index has been 43% during the last ten years. The Italian leading index were unchanged following two months of increase. Nevertheless, the six month growth rate improved to 0.3% though earlier growth rates were revised down. Its correlation with GDP growth has been a low 0.9% during the last ten years.

The U.S. leaders rose 0.2% following two months of decline and six month growth in the leaders improved to a modest 1.2%. The correlation between the leaders and real GDP growth has been a high 58% during the last ten years.

The UK leaders fell 0.1% for the second straight month. Declines in consumer confidence, new car registrations, share prices and the future tendency of production dropped the six month growth rate to -0.3% and its correlation with real GDP growth has been 29% during the last ten years. The Canadian leaders also fell for the second month and the 0.1% decline dropped six month growth to -0.8%. The correlation of the leaders' growth with Canadian real GDP has been 49% during the last ten years.

The latest OECD Leading Indicator report is available here.

Cross-Country Productivity Growth from the Federal Reserve Bank of St. Louis is available here.

OECD Oct Sept Y/Y 2004 2003 2002
Composite Leading Index  103.37 102.99 1.0% 102.36 97.84 96.45
 6 Month Growth Rate 1.7% 1.1%   3.6% 2.7% 2.3%
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