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Economy in Brief

OECD Indicators Show Moderation in Growth Ahead
by Robert Brusca October 5, 2007

THE OECD leading economic indicators trend adjusted are showing a sharp moderation in the regional key indexes. The US is reversing sharply after embarking on a strong upturn earlier in the year. The Euro area is continuing to show waning momentum as that index works its way lower from its peak in mid-2006. Japan is sliding lower at a sharp pace that belies the optimism policy officials there embrace.

The OECD prefers to look over six-month horizons on its indicators so the table below arrays them two different ways. The six-month panel at the table bottom shows why the OECD talks of the indicators as pointing to moderation in growth. Only Europe and Japan are declining on the six-month horizon among these three main areas, yet all but the US are decelerating. The OECD area as a whole has its trend restored LEI rising with the index up by 09%.

But the three-month rate of change at the top of the table tells the story that the circumspect OECD does not want to center on. Yes, these are more volatile calculations and they could be reversed. But the shorter three-month trend tells us that all of these regions are pointing to a decline. Unless some stability sets in soon the six-month indexes will soon be reflecting this same sort of weakness and will point to DECLINES as well. On both approaches Japan looks like it is in trouble. These signals are not compatible with central banks hiking rates anytime soon.

OECD Trend-Restored Leading Indicators
Growth Progression-SAAR
  3Mos 6Mos 12mos Yr-Ago
OECD -1.8% 0.9% 1.3% 2.8%
OECD 7 -2.7% 0.6% 0.7% 2.1%
OECD.Europe -3.0% -0.7% 0.3% 2.1%
OECD.Japan -7.6% -4.3% -1.9% 2.3%
OECD US -0.3% 3.1% 2.1% 2.2%
Six-Month Readings at 6-Mo Intervals:
  Recent six 6Mo Ago 12Mo Ago 18MO Ago
OECD 0.9% 1.7% 0.8% 4.9%
OECD 7 0.6% 0.8% -0.1% 4.4%
OECD.Europe -0.7% 1.2% 2.4% 1.9%
OECD.Japan -4.3% 0.7% 0.2% 4.4%
OECD US 3.1% 1.1% -0.9% 5.4%
Slowdowns indicated by BOLD RED
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