The January reading and the latest revisions to previous months paint a significantly softer picture of global growth and the GLI now locates the global industrial cycle clearly in the ‘Slowdown’ phase. Since GLI Momentum peaked in August 2013 at 0.39%, it has slowed by about 20bps to 0.19% currently. While the initial shift into ‘Slowdown’ (which we first noted in September) had a fairly idiosyncratic flavor, with the AUD and CAD TWI aggregate the biggest driver, several additional components have now worsened too, further substantiating the GLI shift into ‘Slowdown’.
The January Final GLI places the global industrial cycle clearly in the ‘Slowdown’ phase, with positive but decreasing Momentum. Previous GLI readings had already highlighted that global activity growth peaked in August and the latest revisions show the subsequent deterioration more visibly. Some idiosyncratic factors might have had a hand in amplifying the current softness, but still the recent growth deceleration now looks more serious than in previous months.
The fact remains that with the US and Europe both enjoying considerably less fiscal drag this year, growth in developed markets should be better than last year even though US housing is clearly slowing. The greater question is will China and the EM’s suck the life right out of the lemon? My answer is “yes”, as you know.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
