Goldman's Global Leading Indicator Says Growth Will Now Gain Momentum

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Photo: flickr user Martin Pettit

Goldman’s Global Leading Indicator (GLI), their proprietary measure of future global growth, rose 4.3% year over year in October, which was slower than September’s 5.1% gain, but still historically strong according to the firm.Moreover, they highlight how their measure of monthly momentum has picked up, thus their latest GLI is confirming the view that the global growth is now bouncing higher after slowing around mid-year.

Goldman’s Dominic Wilson:

Improvements in Most Components. Eight of 10 components improved in October, pushing up momentum and slowing the decline of the headline reading. Korean exports jumped to their highest level on record. The Global PMI and New Orders Less Inventories Aggregates improved, both reversing five-month-long slides. The GS Industrial Metals Index and the Manufacturing Aggregate advanced to levels not seen since 2008. Initial Job Claims, the Consumer Confidence Aggregate, and the TWI Aggregate also improved slightly from last month. The Japan Inventory/Sales Ratio and Baltic Dry Index were the only two components that fell in October.

Tentative Signs of a Pickup in Sequential Industrial Growth. We have highlighted since mid-July that the GLI points to a slowing in industrial momentum, although from high levels. The October headline reading remains above its historical average and its pace of deceleration has slowed. Even more encouragingly, momentum has bounced back into solidly positive territory. This supports our expectation that global growth will remain strong going forward, as most of the world—and in particular large developing countries such as China—is able to ‘decouple’ from sluggish US growth. We will look for confirmation of these signs of industrial stabilisation in the months to come.

(Via Goldman, October Final GLI – Rebound in Momentum Confirmed, Dominic Wilson, 1 November 2010)

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