Now here’s something that has not been said about the global economy in many years.
There’s currently a synchronised upswing underway, with a notable improvement occurring in emerging markets across Asia and above-trend momentum seen in all major advanced economies.
That’s the view of ANZ economists Tom Kenny and Giulia Lavinia Specchia who point to the bank’s Global Lead Index (GLI) to back their optimistic view.
“ANZ Global Lead Index (GLI) has risen sharply in the past few months,” the pair wrote in a note released last last week.
“The GLI is currently well above-trend levels and is at levels not seen since 2011. All major regions continue to contribute to above-trend momentum.”
The GLI, broken down into the performance from major economies, is shown in the chart below from ANZ:
Kenny and Specchia say the GLI has a close association with global industrial production, leading hard data by a couple of months.
As such, they say the upswing in the index is “consistent with above-trend global industrial production growth”.
That reading fits with the vast majority of other economic data seen in recent months with global manufacturing and services PMIs hitting fresh multi-year highs in early 2017 while Chinese trade data for January — seen as a barometer of global trade given the sheer size of Chinese economy — also topping expectations.
It all adds to the belief that the global economy is on the mend after a patchy performance in recent years, particularly with all major economies improving in synchronisation, differentiating it from previous years where strength in one major economy often came at the expense of weakness in others.
While things are looking good near-term, Kenny and Speccia say that political uncertainty poses a downside risk to global activity longer-term, along with higher interest rates.
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