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Composite Leading Indicators signal continued slowdown in OECD area

Paris, France -- The Composite Leading Indicators (CLIs) for July 2008 indicate a continued weakening outlook for a...


Paris, France — The Composite Leading Indicators (CLIs) for July 2008 indicate a continued weakening outlook for all the major seven economies in the OECD (Organization for Economic Co-operation and Development). The G7 area covers Canada, France, Germany, Italy, Japan, United Kingdom and United States.

In addition, the latest data for major non-OECD member economies tentatively point to expansion in China, Brazil and Russia and a downturn in India.

The CLI for the OECD area decreased by 0.7 point in July 2008 and was 5.2 points lower than in July 2007. The CLI for Canada decreased by 1.5 point in July and was 5.0 points lower than a year ago. The CLI for the United States fell by 0.2 point in July and was 5.0 points lower than a year ago.

The Euro area’s CLI decreased by 1.2 point in July and stood 6.0 points lower than a year ago. (The Euro area covers the following 12 countries: Austria, Belgium, Finland, France, Germany, Greece, Italy, Ireland, Luxembourg, the Netherlands, Portugal and Spain.

In July, the CLI for Japan decreased by 0.5, and was 3.4 points lower than a year ago.

The CLI for the United Kingdom fell by 0.9 point in July 2008 and was 5.5 points lower than a year ago. For France, the CLI decreased by 1.1 point in July and was 6.0 points lower than a year ago. The CLI for Germany fell by 1.5 point in July and was 6.7 points lower than a year ago. For Italy, the CLI fell by 1.9 point in July and stood 5.9 points lower than a year ago.

The CLI for China decreased 1.3 point in July 2008 and was 1.4 point lower than a year ago. The CLI for India fell by 1.5 point in June 2008 and was 5.5 points lower than in June 2007.

The CLI for Russia increased by 1.8 point in June and was 5.0 points higher than a year ago. In July 2008 the CLI for Brazil increased by 1.4 point and was 2.3 point higher than a year ago.

The OECD CLI is designed to provide early signals of turning points (peaks and troughs) between upswings and downswings in the growth cycle of economic activity. The CLI is an instrument of analysis that has to be used carefully. Whilst it has a long-term average = 100, the CLI provides qualitative information on short-term economic movements rather than quantitative measures. Therefore, the main message of CLI movements over time is the direction up or down in the growth cycle where the cyclical phases are defined as follows: expansion CLI increasing and above 100; downturn CLI decreasing but above 100; slowdown CLI decreasing and below 100; recovery CLI increasing but below 100.

The CLIs are aggregated time series which summarise information contained in a number of key short-term economic indicators known to be linked to GDP. They have been compiled using a modified version of the method developed by the U.S. National Bureau of Economic Research. The CLI system comprises a set of component series selected from a wide range of economic indicators, all sharing the common property of indicating swings in future economic activity.