OECD resumes CLI survey with biggest drop on record

The OECD has resumed its monthly composite leading indicators (CLI) survey after a month off to adjust for the effects of the Covid-19 pandemic, and its latest data show the largest drop on record for most major economies.

The CLI survey is designed to anticipate turning points in economic activity relative to trend 6-9 months ahead, so the latest data give an idea of oil demand towards the final quarter of this year. The survey released today point to a sharp slowdown in the US, China, the eurozone, Brazil, Japan, Russia and the UK, and a slowdown in India.

In its previous CLI survey, issued in February, the OECD said momentum in each of these economies was either stable, stabilising, easing or growing. Then, the OECD cautioned about a high degree of uncertainty because of the coronavirus outbreak, which had not been declared a pandemic at the time. It subsequently cancelled its March survey because of the rapidity of the spread.

Today it said that "particular care" is needed when interpreting the CLI data, because the ability of leading indicators to predict business activity has been severely curtailed. With that in mind, it cautioned that the magnitude of the CLI decline "should not be regarded as a measure of the degree of contraction in economic activity, rather it should be viewed as an indication of the strength of the signal that economies have entered a phase of contraction".

The OECD also said the CLI survey is not yet able to anticipate the end of the slowdown, but that it should be of more use as the situation unfolds.

An IMF official said last month that the global economy could contract this year.

By Ben Winkley