The Hindu Business Line : OECD indicators signal deepening global slowdown

The latest composite leading indicators (CLI) for October 2008 published by the OECD secretariat signal a deepening slowdown in OECD area (group of industrialised countries including major seven economies) and non-OECD member economies such as China, India, Brazil and Russia as well.

The CLI for OECD area decreased by 1.0 point in October 2008 and was 5.9 points lower than in same month last year. CLIs for the US, Euro area, Japan and other major economies fell too, but the extent varied.

The emerging economies have not remained insulated either. The CLI for India fell by 1.1 point in October 2008 and was 6.6 points lower than exactly a year ago. The OECD described this as a strong slowdown. The CLIs for China, Russia and Brazil decreased too, with Brazil alone facing a downturn and others a strong slowdown.

It is known, the OECD CLI is designed to provide early signals of turning points in business cycles - fluctuations of economic activity around its long-term potential level. The approach, focussing on turning points (peaks and troughs), results in CLIs that provide qualitative rather than quantitative information on short-term economic movements. These leading indicators help explain the collapse of various commodity markets.

Weak demand

Strongly slowing economic growth simply means weak demand for many commodities including energy products, industrial metals, base metals, polymers and so on. There has been a slowdown in construction activity in major economies, while manufacturing sectors such as automobile industry continue to face slowing demand and even demand destruction in some cases.

On current reckoning, there is nothing to suggest a break in the deepening global slowdown.

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