Global Economy
Composite leading indicators point to positive change in growth momentum in the Eurozone
By Michael Hennigan, Finfacts founder and editor
Mar 9, 2015 - 12:57 PM

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The above graphs show country specific composite leading indicators (CLIs). Turning points of CLIs tend to precede turning points in economic activity relative to trend by approximately six months. The horizontal line at 100 represents the trend of economic activity. Shaded triangles mark confirmed turning-points of the CLI. Blank triangles mark provisional turning-points that may be reversed.

Composite leading indicators (CLIs), designed to anticipate turning points in economic activity relative to trend, point to positive change in growth momentum in the Eurozone, and stable growth momentum in most other major economies and the OECD area as a whole.

In Germany, the CLI confirms the positive change in momentum that was tentatively flagged in last month’s assessment. The outlook for Italy and France has also improved, with the CLIs now showing tentative signs of a positive change in momentum.

The OECD said stable growth momentum is anticipated amongst most other major economies, including the United States, the United Kingdom, Canada, Japan, China and Brazil. In India, the CLI continues to indicate firming growth, while in the CLI still points to a loss in growth momentum.

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-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.


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