OECD composite leading economic indicators (CLIs) for May 2009 point to tangible signs of improvement in the outlook of most OECD economies. Potential recovery signals are emerging in Italy and France, with indications of troughs emerging in Canada, the United Kingdom, the United States, China and India. The trough signals are more tentative in Russia.

The CLI for the OECD area increased by 0.8 point in May 2009 but was 7.3 points lower than in May 2008. The CLI for the United States increased by 1.0 point in May but was 9.4 points lower than a year ago. The Euro area’s CLI increased by 1.0 point in May but stood 4.7 points lower than a year ago. In May, the CLI for Japan decreased by 0.3 point and was 14.1 points lower than a year ago.

The CLI for the United Kingdom increased by 0.8 point in May 2009 but was 2.7 points lower than a year ago. The CLI for Canada increased by 0.9 point in May but was 6.3 points lower than a year ago. For France, the CLI increased by 1.3 point in May and was 0.7 point greater than a year ago. The CLI for Germany increased by 0.5 point in May but was 11.8 points lower than a year ago. For Italy, the CLI increased by 1.7 point in May and stood 1.1 point greater than a year ago.

The CLI for China increased 1.1 point in May 2009 but was 6.5 points lower than a year ago. The CLI for India increased by 1.4 point in May 2009 but was 4.4 points lower than in May 2008. The CLI for Russia increased by 0.7 point in May but was 20.7 points lower than a year ago. In April 2009 the CLI for Brazil decreased by 0.8 point and was 13.7 points lower than a year ago.

The OECD CLI is designed to provide early signals of turning points in business cycles - - fluctuations of economic activity around its long term potential level. The approach, focusing on turning points (peaks and troughs), results in CLIs that provide qualitative rather than quantitative information on short-term economic movements. Four cyclical phases form the basis of this qualitative approach: expansion – CLI increasing and above 100; downturn - - CLI decreasing and above 100; slowdown - - CLI decreasing and below 100; recovery - - CLI increasing and below 100. Although the CLIs attempt to predict movements in the output gap, they should not be interpreted as providing exact forecasts.