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News : International Last Updated: Jan 11th, 2008 - 12:29:16


OECD Composite Leading Indicators signal a downswing in all major OECD economies
By Finfacts Team
Jan 11, 2008, 11:46

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Moderate slowdown in the OECD area Source: OECD

The latest composite leading indicators (CLIs) suggest that a moderate slowdown in economic activity lies ahead in the OECD area. November 2007 data indicate a slowdown in all major seven economies except the United States, Germany and the United Kingdom where only a downturn is observed. The latest data for major OECD non-member economies point to continued steady expansion in China and Brazil, improved performance in Russia but a weakening outlook for India.

The CLI for the OECD area decreased by 0.5 point in November 2007 and is 2.2 points lower than a year ago. The CLI for the United States fell by 0.8 point in November and it is 1.5 point lower than a year ago. The Euro area’s CLI decreased by 0.3 point in November and stands 2.3 points lower than a year ago. In November, the CLI for Japan fell by 0.2 point, and it is 6.3 points lower than a year ago. The “dwellings started” component of the CLI for Japan reflects a backlog due to administrative changes in the Building Standard Law, and it explains part of the large fall in the CLI. The CLI for Japan shows, however, the same tendency even when the effect of this component is filtered out.

The CLI for the United Kingdom decreased by 0.6 point in November 2007 and it is 0.4 point lower than a year ago. The CLI for Canada decreased 0.7 point in November and is at the same level as a year ago. For France, the CLI decreased by 0.1 point in November and is 1.2 point lower than a year ago. The CLI for Germany fell by 0.2 point in November and it is 3.0 points lower than a year ago. For Italy the CLI decreased by 0.4 point in November and it stands 2.7 points lower than a year ago.

The CLI for China increased by 0.2 point in November 2007 and stands 2.3 points higher than a year ago. The CLI for India rose by 0.9 points in October 2007 but it is 0.4 points lower than a year ago. The CLI for Russia fell by 0.4 point in November, but its level is 0.9 points higher than a year ago. In November 2007 the CLI for Brazil rose by a revised 1.0 point and stands 6.3 points higher than a year ago.

The OECD-Total covers the following 29 countries: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States.

The G7 area covers Canada, France, Germany, Italy, Japan, United Kingdom and United States.

The Euro area (not including Slovenia) covers the following 12 countries: Austria, Belgium, Finland, France, Germany, Greece, Italy, Ireland, Luxembourg, the Netherlands, Portugal, and Spain.

Downturn in the United States Source: OECD

The OECD CLI is designed to provide early signals of turning points (peaks and troughs) between upswings and downswings in the growth cycle of economic activity. The CLI is an instrument of analysis that has to be used carefully. Whilst it has a long-term average = 100, the CLI provides qualitative information on short-term economic movements rather than quantitative measures. Therefore, the main message of CLI movements over time is the direction up or down in the growth cycle where the cyclical phases are defined as follows: expansion – CLI increasing and above 100; downturn – CLI decreasing but above 100; slowdown – CLI decreasing and below 100; recovery – CLI increasing but below 100.

The CLIs are aggregated time series which summarise information contained in a number of key short-term economic indicators known to be linked to GDP. They have been compiled using a modified version of the method developed by the US National Bureau of Economic Research. The CLI system comprises a set of component series selected from a wide range of economic indicators all sharing the common property of indicating swings in future economic activity (224 series are used in total, about 5-10 for each country).

© Copyright 2007 by Finfacts.com

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