The world is headed for an economic slowdown, according to the Economic Cycle Research Institute's (ECRI) Long Leading Index of global industrial growth. Lakshman Achuthan, founder and managing director of the research center, said the US economy will not escape the downturn, but will ”participate in it … and in one way, shape or form, it is going to impact this recovery.”
Sources: Dismal Scientist; I-Net Bridge; Plexus Asset Management.
I have argued all along that the US financial markets (bonds, stocks and metal prices) and labor are perhaps the largest components of the ECRI WLI. The success of the ECRI WLI as a leading index of the US economy therefore means that the market is quite successful in anticipating the state and prospects of the underlying economy.
However, there are times when the market overreacts, only to return to normality afterwards. Examples are the last quarter of 2009 and the third quarter of last year – yes, the latter had many commentators calling for a double-dip recession!
Sources: Dismal Scientist; I-Net Bridge; Plexus Asset Management.
To me the most important indicator of the short-term outlook for the US economy is my ISM GDP-weighted composite PMI (manufacturing and non-manufacturing), which also leads industrial production by approximately three months. Although the composite PMI has weakened somewhat over the past three months, it still indicates that year-on-year industrial production growth is likely to be maintained at approximately 5% until the end of July.
Sources: Dismal Scientist; I-Net Bridge; Plexus Asset Management.
At this juncture, I would prefer not to make forecasts beyond July this year and will rather focus on what the markets will be telling me through the ECRI WLI and my ISM composite PMI.
About The Author - Prieur du Plessis is chairman and founder of South African-based Plexus Asset Management. Professor extraordinaire teaching investment management at the University of Stellenbosch Business School, Prieur also maintains a blog at Investment Postcards from Cape Town.
Sources: Dismal Scientist; I-Net Bridge; Plexus Asset Management.I have argued all along that the US financial markets (bonds, stocks and metal prices) and labor are perhaps the largest components of the ECRI WLI. The success of the ECRI WLI as a leading index of the US economy therefore means that the market is quite successful in anticipating the state and prospects of the underlying economy.
However, there are times when the market overreacts, only to return to normality afterwards. Examples are the last quarter of 2009 and the third quarter of last year – yes, the latter had many commentators calling for a double-dip recession!
Sources: Dismal Scientist; I-Net Bridge; Plexus Asset Management.
To me the most important indicator of the short-term outlook for the US economy is my ISM GDP-weighted composite PMI (manufacturing and non-manufacturing), which also leads industrial production by approximately three months. Although the composite PMI has weakened somewhat over the past three months, it still indicates that year-on-year industrial production growth is likely to be maintained at approximately 5% until the end of July.
Sources: Dismal Scientist; I-Net Bridge; Plexus Asset Management.At this juncture, I would prefer not to make forecasts beyond July this year and will rather focus on what the markets will be telling me through the ECRI WLI and my ISM composite PMI.
About The Author - Prieur du Plessis is chairman and founder of South African-based Plexus Asset Management. Professor extraordinaire teaching investment management at the University of Stellenbosch Business School, Prieur also maintains a blog at Investment Postcards from Cape Town.
