The Wilder View

OECD paints dreary picture

The Organisation for Economic Co-Operation and Development (OECD) released its December composite leading indicator (CLI) report. The OECD has 30 member nations, and economic activity has fallen, and continues to decline, to its lowest level since 1975.


The chart illustrates the OECD CLI since 1961; the CLI is measured to indicate turning points in economic activity. The CLI level 100 represents the long-term trend in economic activity: a CLI above 100 indicates above-trend economy activity, while a CLI below 100 indicates below-trend economic activity. The OECD as a whole is producing well below trend, 92.9.

The CLI pattern is constructed to lead economic activity, so wait to see the CLI rise to indicate that economic stabilization may be underway. That certainly did not occur in December, as the OECD CLI fell 1.1%, its fifth consecutive decline of 1% or more.

At the country level, Russia is showing the most slack in economic activity, while Brazil is showing the least. December08_cli.png

This chart illustrates December country-level CLIs across most member OECD countries and key non-member countries (you can see the member countries here). The world economy is suffering jointly – all countries measured in the CLI are below trend (100) and underutilizing resources (i.e., there are unemployed workers and capital not being used for the time being).

However, the last time that the total OECD CLI fell below 100 coincided with the 2001 U.S. recession (see first chart). In October 2001, total OECD economic activity fell below trend to 97. At that time, country-level data indicated that several countries were producing above or close to trend.

As measured by the CLIs, the 2008/2009 cycle is much, much worse than the last cycle.


This chart illustrates that in October 2001, when total OECD economic activity bottomed at 97, Australia and New Zealand producing very close to trend. It reiterates the severity of the global recession (we can call it a recession if the IMF forecasts 0.5% global growth in 2009).

Originally published at the News N Economics blog and reproduced here with the author’s permission.

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