Global: Business Cycle Monitor

Summary and outlook

Leading indicators for the major regions are showing signs of improvement following a soft period. In particular, leading indicators for the euro area are looking better. In the US, the picture is mixed but the OECD leading indicator points to some reacceleration soon. Data for China is still mixed.
Looking ahead, we expect gradual improvement in global indicators except for the US ISM, which is still at a very elevated level. We expect the sharp decline in oil prices to underpin a consumer-driven recovery. In the euro area, we look for a bottom in growth soon and for PMIs and business surveys to grind higher in H1. The picture in emerging markets is likely to stay mixed but we expect China to see a moderate recovery over the coming quarters. For more on our growth expectations, 1 December.

Details

The signals for the US are a bit mixed. ISM is still at a very high level but it is a bit out of sync with actual demand growth and other indicators, which have softened. The OECD’s leading indicator has gained some pace recently though, suggesting that US growth will reaccelerate in H1. This is in line with our expectations.
In the euro area, leading indicators have shown the first signs of bottoming lately. While still negative, momentum in leading indicators has moved higher and both German ZEW and ifo expectations have also increased. Real money growth has gained pace again, pointing to around 2% growth in the euro area in mid-2015. We expect further increases in growth and business surveys over coming quarters.
Looking at China, the picture is mixed. PMI has edged lower, while momentum in industrial production has increased slightly from a low level. Japanese indicators are generally more positive except the Eco Watchers Survey, which has softened.
In the Scandi countries, Denmark and Finland look soft, while Sweden is showing stronger signals. In Norway, indicators are broadly neutral but we believe we are likely to see the effects of the lower oil price on Norwegian sentiment soon.

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