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Leading indicators signal chemicals slowdown

Economic growth
By Paul Hodges on 14-Jun-2008
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The latest leading indicators from the OECD (shown in red above) are now diverging quite strongly from actual Industrial Production performance (shown in blue). The chart is taken for the latest American Chemistry Council (ACC) weekly report, and the ACC comment that the indicators should anticipate changes in ‘global industrial activity’ and ‘provide early signals of turning points (peaks and troughs)’. The ACC adds that they are also ‘good indicators for basic and specialty chemicals, 85% of which are sold to the industrial sector’.

The puzzle is the divergence that seems to have opened up since 2005. Before then, actual industrial production seemed to track the indicators very well, with a suitable lag. Perhaps the availability of cheap credit between 2005-7 allowed a higher level of production than normal? Whatever the cause, the ACC is not optimistic that this divergence will continue, commenting that ‘the data suggests that global industrial production will further slow’.