GOLDMAN SACHS: GLOBAL ECONOMY IN CONTRACTION PHASE
Interesting update here on Goldman’s global leading indicator. They’re now saying it points to a global contraction:
“The first of these frameworks relates the phase of the cycle, as represented by our Global Leading Indicator, to the performance of asset markets. Last week’s final reading of our May GLI now shows that the global economy has been in the ‘contraction’ phase (negative and falling momentum) since April. This is typically the phase that is most damaging for risk assets and most helpful for government bonds.”
And from a different piece Goldman notes that the GLI “point to an increasingly worrying outlook for the global economy”:
“Momentum Negative, Headline Barely Positive. Our May Final GLI headline came in at 0.1%yoy, up from last month’s revised reading of -0.1%yoy. Monthly momentum deteriorated further to -0.06%mom from a revised -0.03%mom in April. The revised series shows that momentum peaked in January at a lower level than originally indicated, and has shifted into negative territory over the last two months. The final May momentum reading with the full set of components is notably weaker than the preliminary print, reflecting the fact that global data continue to underperform their US counterparts (which receive a heavier weight in the preliminary GLI calculations). Overall, the sequential GLI shifts point to an increasingly worrying outlook for the global economy.”
Source: Goldman Sachs
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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2 Comments
Not bad except for hindsight doesn’t add much to the mix.
Moneyflow this year though was lightening up on risk as early as Feb increasing into March so was earlier than usual. Disguised broadly because markets were still catching a bid on Tech and stuff like AAPL inparticular ,but breadth showed markets going up increasingly thinly.That is concentrated ,not a good sign. Not that that stops at least a couple of posters here from “increasing weight” ….LOL
Isn’t this precisely what ECRI has been forecasting since late last year?
They have been seeing it in their “long leading” indicators for a while so this is an interesting confirmation.