Ineichen Macro Report Q2 2018
World GDP, based on the latest revisions, is estimated to have been around 3.5% in Q4 2017. This compares to 3.6% in Q3 2017 and 3.3% in Q4 2016. The ratio between GDP-risers and fallers in Q4 was 11:10, i.e., much more balanced than in previous quarters, in which risers exceeded fallers.
Business sentiment: Average business sentiment has been rising throughout 2017 with some months of stability in between. In our last update from January, this average was stalling. Currently the average is falling. The most recent peak of the average was in October 2017. The average fell in all months since then except February.
Leading economic indicators (LEI): The OECD Composite Index as well as the measure for the US have been abnormally stable, rising only when examining second decimals. The ratio between positive and negative changes for the latest available data was 8:4, i.e., a positive bias. Most of the country measures are at their multi-year high or are only within one percentage below that high.
Purchasing managers’ indices (PMI): PMI indicators have fallen over the quarter. The average PMI fell from 56.4 in December to 55.0 in March. However, nearly all PMI indicators are above 50 which is the threshold for an expanding economy. This means it is only the first derivative, the change, that is negative. The strongest falls were in Europe. The PMI for Switzerland, Germany, and France fell by more than five PMI points over the quarter. The Eurozone fell by four to 56.6.
Consumer sentiment: Consumer sentiment fell for the first time for quite a while. This is consistent with economic and business sentiment falling too. However, consumer sentiment in the United States, which is arguably the most important, given its share for the global economy, rose over the quarter and is currently at a multi-year high.
Economic risk: The expectations component of one global economic risk gauge is worsening. One regime test turned negative.
Notable: Some economic indicators indicate that the globally synchronised business cycle has peaked just recently. The violins might just have stopped playing.