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Economy in Brief

OECD Leading Indicators
by Robert Brusca May 10, 2007

While there has been a lot talk above a de-linking of Europe from the US, a rather careful look at the LEIs plotted on the left shows that at least in terms of these signals the US usually calls the tune and the rest of the OECD marches behind. There is NO EVIDENCE of the rest of the world pulling the US up. Instead, it is the US pulling itself up by its own bootstraps while the rest of the world is still under downward pressure in the lexicon of the OECD indicators. The Euro area is slowing. Japan remains quite weak. Meanwhile, the US is showing new life in the OECD framework.

This chart is DEBUNKING the idea of DE-LINKING.

The table below shows that OECD trends point to continuing weakness for Europe and Japan as well as for the whole of the Euro area. Meanwhile the US is signaling rebound and that has helped the OECD area to show some technical improvement.

The top portion of the table labeled ‘progressive growth rates’ shows slightly more weakness that the bottom that looks at spaced 6-month trends. This discrepancy tells us that the weakness is still more new than it is entrenched. And fortunately the US is pulling out ahead of the pack.

I am much more comfortable with the notion that the US is recovering and that will carry Europe than with the notion that Europe will grow and support the US. I don’t believe in the tooth fairy or in de-linking.

OECD Trend-Restored Leading Indicators
Growth Progression-SAAR
  3Mos 6Mos 12mos Yr-Ago
OECD 1.7% 1.8% 1.2% 3.5%
OECD Big 7 0.3% 0.8% 0.3% 2.8%
OECD.Europe 0.6% 1.2% 1.7% 3.6%
OECD.Japan -5.0% -3.0% -2.9% 1.4%
OECD US 2.2% 2.1% 0.7% 3.4%
Six-Month Readings at 6-Month Intervals:
  Recent six 6Mo Ago 12Mo Ago 18MO Ago
OECD 1.8% 0.7% 4.9% 2.1%
OECD Big 7 0.8% -0.2% 4.2% 1.4%
OECD.Europe 1.2% 2.2% 4.9% 2.4%
OECD.Japan -3.0% -2.7% 1.4% 1.4%
OECD US 2.1% -0.7% 5.6% 1.1%
Slowdowns indicated by bold red
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