Global Barometers start 2025 with a setback
The decrease in the Global Barometers in January suggests a pullback after the rise recorded in the last quarter of 2024. With the decline, the Coincident Barometer is moving away from the 100-point mark. However, the Leading Barometer remains above 100 points, indicating a continued positive outlook for the performance of the world economy in the first half of 2025.
In January, the Coincident Global Barometer decreases by 2.1 points to 94.3 points, while the Leading Barometer breaks a streak of three consecutive increases, and decreases by 2.3 points this month to 102.8 points. These movements reflect declines in both indicators for the Asia, Pacific & Africa region and a fall in the Leading indicator for Europe. The Western Hemisphere is now at the highest level among the regions for both the Coincident and the Leading Barometer.
“Despite this month's setback, the two global barometers continue to suggest that the world economy is in recovery mode, with the leading indicator remaining consistently above its long-term average and the coincident indicator. The two have moved in tandem since last May, driven by common underlying forces such as geopolitical events affecting sentiment and surveys around the world”, evaluates Jan-Egbert Sturm, Director of KOF Swiss Economic Institute.
“The two global barometers still suggest that the world economy is in recovery mode”Jan-Egbert Sturm, Director of KOF Swiss Economic Institute
Coincident Barometer – regions and sectors
The 2.1-point fall in the Coincident Barometer in January results from the negative contribution of -1.9 points in the indicator for the Asia, Pacific & Africa region and -0.2 points in the indicator for Europe. The Coincident indicator for the Western Hemisphere remains stable this month, following positive developments in the previous two months, and remains above 100 points.
Among the Coincident sector indicators, the Economy (aggregated business and consumer evaluations), Industry, and Services drive the decrease in the aggregate indicator, while Construction and Trade move in the opposite direction.
Leading Barometer – regions and sectors
The Leading Global Barometer leads the world economic growth rate cycle by three to six months on average. In January, as with the Coincident Barometer, the Asia, Pacific & Africa region and Europe contribute negatively to the overall result with -1.6 and -1.0 points, respectively. In contrast, the indicator for the Western Hemisphere contributes positively to the overall result with 0.3 points and reaches its highest level since August 2021 (115.2 points).
Among the Leading sector indicators, Services suffers heavy losses this month, followed by Industry, Trade, and Economy. Only Construction makes gains after two consecutive declines.
The Global Economic Barometers
The Global Economic Barometers are a system of indicators enabling timely analysis of global economic development. They represent a collaboration between the KOF Swiss Economic Institute of the ETH Zurich in Switzerland and Fundação Getulio Vargas (FGV), based in Rio de Janeiro, Brazil. The system consists of two composite indicators, the Coincident Barometer and the Leading Barometer. The Coincident Barometer reflects the current state of economic activity, while the Leading Barometer provides a cyclical signal roughly six months ahead of current economic developments.
The two Barometers comprise the results of economic tendency surveys conducted in more than 50 countries with the aim of achieving the broadest possible global coverage. The advantages of economic tendency surveys are that their results are usually readily available and are not substantially revised after first publication.
The Coincident Barometer includes more than 1,000 different time series, while the Leading Barometer consists of over 600 time series. Cross-correlation analysis is used to decide which individual time series are included in the barometers. This involves correlating the individual time series with a reference series. The reference series used is the year-on-year growth rate of global gross domestic product (GDP), where the individual national GDPs are aggregated at purchasing power parity to form global GDP. A time series is only included in a Barometer if it shows a sufficiently high correlation and a suitable synchronization or lead with the reference series. The time period used for this correlation analysis currently runs from January 2010 to December 2019.
The series of the two Barometers are revised each month at publication and are standardized to have a mean of 100 and a standard deviation of 10 for the 10-year period previous to the most recent observations.
The methodology is described in:
Klaus Abberger, Michael Graff, Aloisio Jr. Campelo, Anna Carolina Lemos Gouveia, Oliver Müller and Jan-Egbert Sturm (2020), The Global Economic Barometers: Composite indicators for the world economy. KOF Working Papers, vol. 471, Zurich: KOF Swiss Economic Institute, ETH Zurich, 2020.
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