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News : Global Economy Last Updated: Jul 10, 2014 - 12:01 PM


Composite leading indicators continue to point to stable growth momentum in OECD area
By Finfacts Team
Jul 9, 2014 - 2:51 AM

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Composite leading indicators (CLIs), designed to anticipate turning points in economic activity relative to trend, continue to point to stable growth momentum in the OECD area as a whole.

The CLIs for the United States and Canada continue to indicate stable growth momentum. This is also the case for the United Kingdom, where the growth momentum is stabilising at above-trend rates. The CLI for Japan points to an interruption in the growth momentum although this probably reflects one-off factors1.

In the Eurozone as a whole and in Italy, the CLIs continue to indicate a positive change in momentum. In France,the CLI points to stable growth momentum. In Germany, the CLI suggests that growth is losing some of its momentum, but from a high level.

Concerning the major emerging economies, the CLIs point to growth below trend in Brazil and to growth around trend in China and Russia. The CLI indicates a positive turning point in India, suggesting a return to faster growth.

An OECD Composite Leading Indicator, as the name suggests, is constructed from a small number of economic time series that have similar cyclical fluctuations to those of the business cycle, and moreover have a tendency to turn earlier than the business cycle. The business cycle is typically represented by movements in GDP around its long term trend. The OECD CLIs are composite indicators with components that:

  • measure early stages of production;
  • respond rapidly to changes in economic activity;
  • are sensitive to expectations of future activity or
  • are control variables that measure policy stance.

A large set of component series, selected from a wide range of economic indicators, are used in constructing CLIs (around 200 series are used in total, about 5-10 for each country). CLIs are calculated for 33 OECD countries, 6 non-member economies and 8 zones. They are calculated in three forms: amplitude adjusted, trend-restored, and year-on year growth rate. These are comparable, respectively, with the de-trended reference series, the original reference series  and the year-on-year growth rate of the reference series. The press release focuses on the amplitude adjusted form of the CLI, and includes the major countries and zones.

The OECD (Organisation for Economic Co-operation & Development) -Total covers the following 33 countries: Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, 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 (only Euro area countries that are members of OECD) covers the following 15 countries: Austria, Belgium, Estonia, Finland, France, Germany, Greece, Italy, Ireland, Luxembourg, the Netherlands, Portugal, Slovak Republic, Slovenia and Spain.

The Major Five Asia area covers China, India, Indonesia, Japan and Korea.


[1] The CLI for Japan may not fully capture the impact of the hike in its consumption tax rate in April 2014, the first increase since 1997, which is likely to result in an uneven growth profile during the first three quarters of 2014.

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