This indicator suggests global economic growth will 'remain solid and above trend'

The global economy is looking better than any point in recent years.

Here, look.

From ANZ, it’s the bank’s Global Lead Index (GLI), an indicator that tracks the outlook for global industrial production.

Source: ANZ

According to ANZ, it currently sits at the highest level since 2011 with above trend growth being reported across all regions.

“All regions have contributed to above-trend momentum for 11 straight months,” says ANZ. “This is the longest stretch ever in the history of our GLI [going back to 2005]. Our GLI points to well above trend global industrial momentum.”

Here’s the relationship between the GLI and worldwide industrial production on a three-month annualised basis.

Source: ANZ

On this metric, the outlook for industrial activity is looking very good as we enter 2018.

“The GLI is a composite index created from the new order indices of the major regional manufacturing Purchasing Managers’ Indices (PMIs),” says ANZ.

“The weights are the purchasing power parity share of global GDP as taken from the IMF’s World Economic Outlook (WEO) database.”

ANZ says its recent strength points to the likelihood that global activity will “remain solid and above trend”.

The latest JP Morgan-IHS Markit global All-Industry Output PMI — a measure of activity levels across the global manufacturing and services sectors — came in at 54.0 in November, the equal highest level in over two years.

Readings on new orders rose at the strongest pace since September 2014 and backlogs of work increased at the fastest pace in four years, two outcomes that suggest global demand is strengthening.

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