Home Business News CLIs continue to point to a moderating pace of expansion in economic activity

CLIs continue to point to a moderating pace of expansion in economic activity

by LLB Finance Reporter
12th Oct 21 12:12 pm

The pace of expansion in economic activity in the OECD area as a whole looks set to continue to moderate after the post-pandemic rebound, according to the latest OECD Composite Leading Indicators.

The CLIs continue to anticipate a moderating pace of expansion at above trend level in Canada, the euro area as a whole and the United Kingdom, as reported last month. Similar indications have now emerged in the United States and Japan. In France, the CLI expects real GDP levels to remain below the long-term trend and also suggests that growth is likely to moderate. One factor pulling down the CLIs is the persistent rise in consumer prices in recent months, driven by surging energy prices.

Among major emerging-market economies, the CLI for China, weighed down by the contraction of steel production, is now pointing towards stable growth rather than a steady increase, as reported last month. In India the CLI indicates stable growth, but real GDP levels are expected to remain below the long-term growth trend. Slowing growth continues to be anticipated in Brazil. The CLI for Russia is still pointing to a steady increase in growth above the long-term GDP growth trend.

The leading indicators, which include order books, building permits, confidence indicators, long-term interest rates, new car registrations and many more, are cyclical indicators designed to anticipate fluctuations in economic activity over the next six to nine months. They paint a broad picture of economic activity from a large amount of recent forward-looking data.

Despite the gradual lifting of COVID-19 containment measures in some countries and the progress of vaccination campaigns, persisting uncertainties may result in higher than usual fluctuations in the CLI and its components. As such, the CLIs should be interpreted with care and their magnitude should be regarded as an indication of the strength of the signal rather than a precise measure of anticipated growth in economic activity.

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