World headed for cyclical slowdown

Despite the U.S leading economic indicators appearing healthy, the global economy appears to be headed for a slow down, with only 34% of the 40 countries we track having leading economic indicators (LEI’s) signalling growth ahead, and the actual GDP-weighted Global LEI growth now below zero:

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The specific country details are displayed below:

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The European countries, representing some 25% of world economic output have taken a decidedly worrisome turn :

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Many of these LEI’s include sentiment data, and its probably a fair assumption to assume that the “trade wars” talk doing the rounds of late have a big part to play in these negative future growth projections.

Whilst the RecessionALERT U.S Leading index is currently looking robust, we cannot ignore the fact that there is a not-insignificant 40% correlation between the movements of the U.S LEI and the Global one. In fact a visual inspection shows that downturns in the Global LEI invariably always lead to downturns in the US LEI:

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This correlation by no means implies a US recession, but it undoubtedly is likely to put downward pressure on the U.S LEI in the coming months.

It is early days for the co-incident data and no significant signs of a slowdown can yet be witnessed among them. To this end, here is an interesting chart of country GDP growth from 1Q2017 to 1Q2018:

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If you are a RecessionALERT subscriber, you can view the comprehensive global report for May 2018 from the REPORTS menu. You can subscribe to RecessionALERT for a nominal fee over here.

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About Dwaine Van Vuuren

Dwaine has a Bachelor of Science honors degree and is a full-time trader and investor. His passion for numbers and keen research & analytic ability has helped grow RecessionALERT into a company used by hundreds of hedge funds, brokerage firms and financial advisers around the world.
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