Global Barometers indicate a slowdown in world economy
The Coincident and Leading Barometers decrease for the third consecutive month. This time more markedly, reflecting rising uncertainty due to escalating trade tensions and the prospect of slower growth in several regions.
In May, the Global Economic Coincident Barometer decreases by 3.6 points to 92.2 points, the lowest level since February 2023, when it recorded 89.0 points. The Leading Barometer, in turn, drops by 3.9 points to 95.9 points. The falls are mainly driven by the Asia, Pacific & Africa and Western Hemisphere regions.
“Given the geopolitical tensions, it is probably not really surprising that both global barometers show a further decline this month. While it has been most pronounced in the Americas and Asia, led by the US and China, Europe has not been entirely immune. Here, hopes are pinned on the new German government to revive the German, and hence the European, economy and thus counteract the negative impact of trade tensions” comments KOF Director Jan-Egbert Sturm on the latest results of the Global Economic Barometers.
“Hopes are pinned on the new German government to revive the German, and hence the European, economy and thus counteract the negative impact of trade tensions.”Jan-Egbert Sturm, Director of KOF Swiss Economic Institute
Coincident Barometer – regions and sectors
The 3.6-point decrease in the Coincident Barometer in May is primarily due to the negative contribution of 1.9 points from the Asia, Pacific & Africa region and 1.5 points from the Western Hemisphere. Europe contributes slightly, with -0.2 points, to the decrease in the aggregated indicator. This is the third consecutive decrease in the Western Hemisphere indicator, which accumulates losses of over 15 points during the period and reaches 87.2 points, the lowest level since June 2023 (86.8 pts.). The region shows the lowest level among the regional coincident indicators.
All coincident sectoral indicators decrease in May, with the most noticeable declines in Industry and the Economy indicator (which is based on variables representing overall business and consumer evaluations). The Services sector continues to record the lowest level among the sectors.
Leading Barometer – regions and sectors
The regional contributions to the decrease in the Global Leading Barometer in May follow the same pattern observed in the Coincident indicator: the strongest contribution, of -2.6 points, comes from the Asia, Pacific & Africa region, followed by the Western Hemisphere, with -1.2 points. Europe contributes with -0.1 points to the aggregated result. The Western Hemisphere Leading Indicator diverges from the other regions and continues to record the lowest level among them. The Leading Global Barometer leads the world economic growth rate cycle by three to six months on average.
Among the leading sectoral indicators, only the Services indicator rises slightly this month. The most marked decreases are seen in the Economy (which is based on variables representing overall business and consumer evaluations), Trade, and Industry indicators. As a result, the Trade indicator falls into the 80-point range, reaching its lowest level since October 2023 (87.5 pts.). The Economy indicator also returns to its lowest level since 2023.
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). The reference series covers 10 years of data. A COVID period has been defined using a global stringency indicator, and a data window from January 2020 to March 2023 has been excluded from the reference series. 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 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 Global Barometers 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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