Economy in Brief: June 2022

The amplitude adjusted OECD leading economic indicators in May continue to show weak conditions. The overall OECD index declined in May month-to-month. The index for the top seven OECD countries declined, the index for the euro area declined, the index for Japan was unchanged and the index for the United States was unchanged.

The OECD prefers to look at its leading economic index signals in terms of six-month changes. Viewed in that way, the OECD overall index is down by 0.5%, the index for the seven largest OECD countries is down by 0.5%, the index for the euro area is down by 0.7%, the index for Japan is flat, and the index for the U.S. is down by 0.4%. Over six months the index for China is down by 0.8%. Those figures are for six-month averages; to the right of them, in the table, we see changes over six months calculated on point-to-point data and those changes also show broad weakness and weakness that has been in train over the past 12 months (two nonoverlapping weak six-month modules in the table back-to-back).

The indicators show that growth broadly is below its steady state pace in most of the aggregate presentations. The levels of the normalized amplitude adjusted leading indicators in the bottom panel of the table, reveal readings below 100; for the month of May they indicate weakness for every country or region except for Japan and Germany; Japan and Germany are also exceptions in April. Much of this weakness came on in April since in March these same indicators show slowing tendencies in only 5 of the 12 entries in the table. However, those slowdowns were for important economic areas as they included the U.S. and China. China's 'Covid zero' policy has been a drag on global growth and has been particularly hard on Asian economies.

The queue percentile standings for six-month growth show ranked values below 50% which means below the median for five of six entries in the table with Japan being the exception. Looking at a broader array of countries and areas and applying the queue percentile standings to the levels of the indicators instead of the six-month changes, there are only three with readings above 50% indicating values that are above their historic medians. Those three countries are Japan with a standing at its 77th percentile, Germany with a standing at its 77th percentile, and France with a standing at its 50th percentile. A few countries have standings in the lower quartile of their range; that includes China and Greece as the U.K. barely escapes that designation. The European Monetary Union has a standing in the bottom one-third of its historic queue of values.

The OECD indicators are clearly indicating that there is a great deal of moderate weakness and subpar growth in train across these economies. Only a few developed economies are experiencing more extreme weakness such as China where it's Covid-zero policy is responsible for curtailing growth.