Danske Research Team
Danske Bank A/S
Summary and outlook
Leading indicators continue to suggest that the euro area and Japan are recovering and thus converging a bit with the US economy. The US indicators have come away from their high levels but still point to robust growth. Chinese data still looks soft.
Looking ahead, we expect to see further recovery and a rise in PMI in the euro area. Our models point to more potential for short-term weakness in ISM, but the low oil price is fuelling strong consumption and we expect growth to stay around 3% in the coming quarters. In China, we look for stabilisation soon and a gradual recovery in PMI during Q2. See also The Big Picture: Synchronous global recovery in H1 15, 1 December 2014, for more on our expectations.
Details
In the US the leading indicators have weakened but still point to robust growth. ISM dropped in December and is now more in line with other economic indicators. The OECD leading indicator has lost some momentum but this probably reflects a moderation from the 4.5% growth in Q2/Q3 to around 3.0-3.5%.
Leading indicators for the euro area show more improvement. The leading indicator, German ZEW and ifo expectations have all bottomed. Real money growth, which has a longer lead time, has gained pace and points to 2% growth in mid-2015.
China shows mediocre results at the moment as PMI and industrial production momentum is still weak. Japanese indicators are overall positive, with the increase in industrial production being especially noteworthy.
For the Scandinavian countries we continue to experience soft signs from Denmark and Finland while the leading indicator for Sweden is at a historic high. The lower oil prices have not yet affected Norwegian sentiment, where the hard data is stronger than the soft.
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