The OECD composite leading indicators (CLIs) point to potential turning point in economic activity in the euro area and regained momentum in other economies, the Organisation for Economic Cooperation and Development announced today.

Positive momentum

Based on the latest (February 2012) industrial production data, the agency found continued positive momentum in the developed economies as a whole but with some divergence between major economies.

The OECD leading indicators are designed to anticipate turning points in economic activity relative to trend and they tend to precede turning points in economic activity relative to long-term trend by approximately six months.

While CLIs for the US and Japan continue to show strong signs of regained momentum in economic activity, the assessment for non-member OECD economies — Brazil, India, Russia and China in particular — shows stronger positive signals compared with the previous month's assessment.

From the release of April 2012, the OECD will switch to using GDP as the reference for CLI's construction, ceasing to rely on the IIP as an intermediate target, except for China, the release said. The positive correlation between economic growth and consumption of growth-driven commodities such as crude and industrial metals is well known. The latest leading indicators are expected to lend renewed strength to the global base metals market, particularly copper and tin which are in deficit.

If the flow of macro data continues to remain positive in the coming months, one can also expect larger flow of speculative capital into commodity derivatives.

Growth prospects will spur risk appetite and funds that are currently in the sidelines will come in. This will have implications for market prices.

Related Topics
comment COMMENT NOW