The last four reports of the OECD composite leading indicators (CLIs), which trace the global recovery as it winds it way out of the recession, highlight the slow and almost torturous process that separates the early birds from the most affected. Optimism of an incipient turnaround has now gained momentum as potential recovery signals are emerging in Italy and France, with indications of troughs emerging in Canada, the UK, the US, China and India, says the most recent CLI for May.
An early positive sign of the turnaround from the totally dismal picture painted by the January indicators was the tentative signs of an improvement in the rate of deterioration in February, first noticed in Italy and France. The lead indicators for March then traced a pause in the economic slowdown in France, Italy and the UK in the OECD countries, and in China among the non-OECD countries. The signals gained strength in the next two reports with the terminology used in the report changing rapidly as the pause in the economic slowdown slowly gave way to temporary or a more durable turning point.
The depth of the global recession is highlighted in the scenario of January 2009, which pointed to the weakening outlook for all the major seven economies, with the OECD total falling again to a new low and little clear indication of stabilisation soon. The report also noted that the outlook has continued to deteriorate in the major non-OECD member economies, particularly Brazil, which now joins China, India and Russia, in the strong slowdown group, said the report.
Though the next one in February said that the composite leading indicators continue to point to a deep slowdown for all the major seven economies, there was a caveat this time, which stated that some tentative signs of improvement in the rate of deterioration in the outlook are appearing in some countries, noticeably Italy, France and in some of the smaller OECD countries, the emphasis on ?tentative? cannot be overstated. However, the overall picture remained weak with the outlook in the US, Canada, Japan and the major non-OECD member economies further deteriorating since the previous month.
A breakthrough highlighted in the March report was the pause in economic slowdown in a few OECD and non-OECD countries for the first time even as the overall slowdown persisted. Leading the pack was France, Italy and the UK showing tentative signs of, at least, a pause in the economic slowdown. In other major OECD economies the CLIs continue to point to deterioration in the business cycle, but at a decreasing rate. However, with the exception of China, where signs of a pause have also emerged, major non-OECD economies continued to face deteriorating conditions.
Though it was still too early to judge whether it is a temporary or a more durable turning point, the CLI for April 2009 pointed to a reduced pace of deterioration in most of the OECD economies, with stronger signals of a possible trough in Canada, France, Italy and the UK. The signals remained tentative but they were present in the majority of the CLI component series for these countries. And positive signals were also emerging in Germany, Japan and the US as compared to the previous month. However, major non-OECD economies still faced deteriorating conditions, with the exception of China and India, where tentative signs of a trough have emerged.
The most recent CLIs for May point to tangible signs of improvement in the outlook of most OECD economies. Potential recovery signals are emerging in Italy and France, where positive change has been attained on a year-on-year basis. And month-over-month numbers have remained positive for Canada, the UK, the US, China and India with the highest gains in Italy, China and India where the CLIs have been positive for four months. The trough signals are more tentative in Russia.