Global Barometers move in opposite directions in March
In March, the coincident and leading Global Barometers show diverging movements. While the Coincident Barometer declines after a slight increase last month, the Leading Barometer rises for the second month in a row.
In March, the Coincident Global Barometer decreases by 1.3 points to 94.0 points, which is close to the level of January. The Leading Barometer, however, gains 1.1 points to reach 103.6 points. The fall in the Coincident Barometer is driven by the indicators for the Asia, Pacific & Africa region and the Western Hemisphere, while the rise in the Leading Barometer is driven mainly by the Asia, Pacific & Africa region, followed by Europe. The indicators for the Western Hemisphere are in decline this month on both temporal horizons.
“Although it is clearly too early to draw firm conclusions, the Global Barometers are beginning to reflect the economic impact of the policy changes now being implemented in the US. The Western Hemisphere, the most affected region, is the only one to show a decline in both the coincident and leading global barometers. Instead, and in spite of this, the other regions see an improvement in the outlook. So, with the exception of the Western Hemisphere, it is not yet possible to say that the increased political uncertainty emanating from the US has led to a deterioration in the outlook for Europe and Asia, Pacific and Africa”, comments Jan-Egbert Sturm, Director of the KOF Institute, on the latest results of the Global Barometers.
“Although it is clearly too early to draw firm conclusions, the Global Barometers are beginning to reflect the economic impact of the policy changes now being implemented in the US.”Jan-Egbert Sturm, Director of KOF Swiss Economic Institute.
Coincident Barometer – regions and sectors
The 1.3-point decrease in the Coincident Barometer in March results from negative contributions of 0.8 points from the Western Hemisphere and 0.7 points from the Asia, Pacific & Africa region, and, in the opposite direction, a positive contribution of 0.2 points from Europe. The latter region maintains an increasing tendency for the third consecutive month, recording 98.6 points, its highest level since it reached 99.0 points in May 2022. The indicator for Europe is now the highest among the regions.
Among the Coincident sector indicators, only Industry records a slight increase, while Construction, Trade, Services, and the indicator for Economy (aggregated business and consumer evaluations) decrease this month.
Leading Barometer – regions and sectors
The Leading Global Barometer leads the world economic growth rate cycle by three to six months on average. In March, the Asia, Pacific & Africa region contributes 0.8 points, and Europe contributes 0.4 points to the overall result. In contrast, the indicator for the Western Hemisphere contributes negatively with -0.1 points. All the regional indicators remain above 100 points, suggesting a moderately positive outlook in relation to world economic growth in the coming months.
Among the Leading sector indicators, the rise in the aggregate result was driven by noticeably advances in the indicators for Economy and Industry. Trade remained relatively stable, while Construction and Services lose ground. Nevertheless, all the Leading sector indicators are above the 100-point level, signaling rather positive outlook for the coming months.
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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