Global indicators signal slow global growth at the beginning of 2014, as especially the US is facing temporary headwinds. We expect a moderation in H114 followed by a re-acceleration in H214 as US headwinds fade. Europe stands out as the strongest region and both Central and eastern Europe continue to show rising trend in PMIs. Indicators for emerging markets have softened.
Summary and outlook
Global indicators weakened somewhat at the beginning of 2014, partly due to bad weather in the US. Europe is the strongest region while indicators in the US and EM have softened.
OECD’s leading indicators generally confirm the signal of slower global growth in H1.
We expect a moderation in H1 14 as especially the US is facing temporary headwinds from bad weather, high inventories and higher gasoline prices. However, we look for a re-acceleration of global growth in H2 as these headwinds fade and fundamentals are generally improving.
Details
Global PMI remained high in February but OECD’s leading indicator for the global economy points to softening in coming quarters. A decline in metal prices also suggests some slowing of momentum in global activity.
In the US, most indicators point to weakening growth in the short term. The inventory-demand ratio is lower and the OECD leading indicator has fallen for two months. The ISM rebounded in February after the sharp fall in the previous month, confirming that bad weather played a central role. However, given signals from other indicators, we believe there is genuine slowing taking place in H1 14 as some temporary lifts from 2013 from inventories and gasoline prices are now reversing. We look for stronger growth in H2.
Europe stands out as the strongest region. Euro area PMI is still trending higher and data in both Germany and peripheral countries has generally been upbeat. The OECD’s leading indicator has lost some momentum, though, suggesting growth could moderate somewhat later in the year. UK PMI has moderated slightly following a period of very strong development. Central and eastern Europe continue to show a rising trend in PMIs.
Scandi data is generally levelling off but from a decent level.
In China, HSCB manufacturing PMI continued its downward climb, decreasing in February for the fourth consecutive month. However, real money growth still suggest that the slowdown will not turn into a hard landing. In Japan, leading indicators are moderating following a very strong performance in 2013.
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