After spending the past year deteriorating with each passing month, as global acceleration dipped decidedly in the negative camp, the only thing that kept the Goldman Global Leading Indicator “swirlogram” somewhat buoyant was that “Growth” measured in absolute terms had remained slightly positive. Not any more: according to Goldman’s latest global economic read, the world is now officially in contraction, following a sharp plunge in both acceleration and growth in February.
As the far simpler 2-D chart below shows, the Goldman GLI mometum indicator is now below 0 for the first time since 2012. It also shows what the momentum of the Global Leading Indicator looks like compared to Global industrial production, which is sure to follow below the X-axis in the coming weeks.
What is causing it? Pretty much everything except Initial Claims in the US (which are great for everyone, except the shale states – expect the weakness seen there to spread everywhere in the coming months).
What is the GLI? “The Global Leading Indicator (GLI) is a Goldman Sachs proprietary indicator that is meant to provide an early signal of the global industrial cycle on a monthly basis. There is an Advanced reading for each month, released mid-month, followed by the Final reading, released on the first business day of the following month. The GLI was introduced in 2002 and has been revised twice since then, in 2006 and 2010.“
Finally, some parting words from Goldman’s Noah Weisberger:
The February Advanced GLI came in at 1.8%yoy, down from last month’s reading of 2.0%yoy. February Advanced Momentum fell to just slightly under zero, after remaining positive but in decline for seven months. With Momentum slightly negative, the GLI falls into the ‘Contraction’ phase.
Six of the seven Advanced GLI components have worsened in February so far. The two market-based gauges – the S&P GSCI Industrial Metals Index® and AUD and CAD TWI aggregate component – continued to decline this month. The Philadelphia Fed headline print (the Advanced proxy for the Global PMI) declined for a third month following its two-decade high of 40.2 in November. The volatile Baltic Dry Index also decreased for a third month. The Philly Fed New Orders less Inventories component and the University of Michigan survey (an early proxy for our Consumer Confidence aggregate) also deteriorated this month. The sole improving component in the Advanced GLI this month was US Initial Jobless Claims.
Into ‘Contraction’ side of the Contraction-Slowdown border
The February Advanced GLI locates the global industrial cycle in the Contraction phase, which is characterised by negative and decreasing momentum. This follows last month’s Final GLI, which indicated that the GLI was still in ‘Slowdown
How much longer the rigged, HFT and central bank-manipulated “markets” can continue to ignore what is now a global contraction (from which the US is now clearly not decoupling courtesy of the 30 out of 35 economic misses just in February following today’s latest Philly Fed miss) is anyone’s guess.
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