Boom/Gloom Index indicates downturn underway

Index Sept10.pngLast month’s IeC Boom/Gloom Index showing a worrying weakness in sentiment, particularly when the world’s major stock markets had actually recorded good performances in July, albeit on low volume.

But as the chart shows, this month confirms the downturn reading, with the Index (blue column) below the 4.0 level. Further confirmation of this reading comes from the 4.7% fall in the US S&P 500 Index over the month. Crude oil prices, which have been strongly correlated with the S&P, have also weakened sharply.

The only positive is that the Austerity reading (red line) fell back to April’s level. But, of course, this was still high by comparison with earlier months. And with the return of politicians from their summer holidays, the austerity message may well start to gain in volume again.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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2 Responses to Boom/Gloom Index indicates downturn underway

  1. Pierpaolo Ferluga 2 September, 2010 at 4:02 pm #

    Hi Paul….I read in your blog always negative index….but then I’m challanged by totally different opinions, like PMI index in USA…
    how do you read the different info and vision from ISM – PMI index?
    it looks like analyst are talking about 2 different planets:
    ” Still experiencing intermittent delays in electronic components due to capacity and raw materials.” (Electrical Equipment, Appliances & Components)
    “International sales are especially strong. Domestic business is solid.” (Chemical Products)
    “Orders and business still strong.” (Primary Metals).

    are you able to give a rational and objective explation??

    thxs a lot.


  2. Paul Hodges 2 September, 2010 at 4:19 pm #

    Thanks for the comment, Pierpaolo. I think an important part of the picture is the lack of credit, which means companies do not have the inventory levels that they used to have. This means that they have much less flexibility when ordering. So a small upward movement in orders causes problems down the chain that wouldn’t have existed two years ago, and this then gets reflected in people’s comments. Equally, of course, the US economy has not disappeared off the map and its still 25% of total world GDP, so it would be a surprise if there weren’t areas where people were doing well. I’m sure that people with a good strategy that is well implemented will come through this downturn in very good shape.

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