Global: Business Cycle Monitor

Global: Business Cycle Monitor

• Global indicators took a downturn in Q1 of 2014, although there were a few signs in China and US that the slowdown might be short-lived. The euro area appear as the strongest region currently as indicators are holding up well here. OECD leading indicators released this week generally support the picture of slowing global growth in H1 indicators.

• We expect a moderation in the global economy in H1 mostly due to bad weather in the US, high inventories and softening Chinese data. Q2 is expected to be a transitory period slowly picking up some momentum as the temporary headwinds fade before a re-acceleration of global growth is expected in H2.

• Global PMI levelled off in March but from a decent level well above 50. The OECD leading indicator for the global growth also suggest some activity slowdown in the months to come.

• In the US, the ISM indicators suggest growth will pick up in Q2 after a weak Q1. The ISM did not rise as much as expected, but comments were quite upbeat. High inventories relative to demand suggest that the rebound in Q2 will be moderate. The euro area continues a positive trend and still marks itself as the strongest region. The euro area PMI figures generally performed well in March with especially France surprising positively. Signs of convergence between the front runner Germany and the rest of the euro area appeared as the German data came out slightly weaker though still at a very high level. Also the periphery countries continued the upwards climb. UK as well as Central and Eastern Europe data weakened. Scandi data was decent with increasing PMIs in both Denmark, Sweden and Norway.

• In China, the HSCB manufacturing PMI is still levelling off, decreasing for the fifth consecutive month. Weak details suggest the declining trend will continue next month, but positive trends in the official (NBS) PMI figures and increasing leading indicators indicate that China will soon reach the bottom. Moreover, lower interest rates and prospects of easing fiscal policy points towards a stronger H2 14 for China. Data for Japan is softening after being very strong in 2013.