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Economy in Brief

OECD LEIS Sink and Signal a More Impressive Slowdown
by Robert Brusca January 12, 2009

The outlook for the world's major industrialized and emerging economies worsened markedly in November, according to the monthly OECD Trend adjusted leading indicators. The OECD said the figures point to a "deep slowdown" in the area. The Organization for Economic Cooperation and Development's leading indicator for the Group of Seven advanced industrial nations fell to 93.3 in November from a confirmed 94.8 in October. It was a 7.7-point year-on-year drop.

The OECD in characterizing these indicator movements said, "OECD composite leading indicators for November 2008 point to deep slowdowns in the major seven economies and in major non-OECD member economies, particularly China, India and Russia."

The sharpest monthly drop among the G7 economies was Germany's at 2.0 points, bringing its indicator to 91.6. The smallest drop was in Italy, which posted a fall of 0.2 points to 95.8. The fall for the G7 as a whole was 1.5 points. Japan's indicator fell 1.6 points month-on-month to 93.7. Clearly the weakness in the OECD is spread around. Germany, a country that has been slow to embrace the concept of slowdown, is now beginning to experience the full brunt of one (based on data through November).

The indicators for Brazil, China, India and Russia fell at least as sharply month-on-month as in October, with Russia posting the largest fall among those emerging economies, a drop of 4.3 points. In all OECD countries, the G7, and major emerging countries, except Brazil, the growth cycle outlook was described as a "strong slowdown". Brazil's was listed as a "downturn".

Clearly previous view that held that the global slowing would have a muted impact on the fast growing developing economies was wrong. Indeed, the slide in commodity prices has particularly aggravated the situation in Russia and other commodity producing countries. There are no islands of stability.

OECD Trend-restored leading Indicators
Growth progression-SAAR
  3-Mos 6-Mos 12-Mos Yr-Ago
OECD -12.8% -9.9% -5.6% 1.3%
OECD 7 -14.7% -11.3% -6.6% 0.7%
OECD Europe -11.3% -9.5% -6.0% 1.4%
OECD Japan -14.1% -9.9% -4.0% -1.9%
OECD US -17.4% -12.8% -7.6% 1.2%
Six month readings at 6-Mo Intervals
  Recent six 6-Mos Ago 12-Mos Ago 18- Mos Ago
OECD -9.9% -1.1% -0.3% 3.0%
OECD 7 -11.3% -1.6% -1.1% 2.5%
OECD Europe -9.5% -2.2% 0.5% 2.3%
OECD Japan -9.9% 2.2% -2.6% -1.2%
OECD US -12.8% -2.1% -1.4% 3.8%
Slowdowns indicated by BOLD RED
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