Global Barometers: global economy continues to cool
The Global Barometers fell again in August, signaling a sharp slowdown in global growth in the third quarter of this year. The Coincident Barometer declined for the seventh month in a row, while the Leading Barometer decreased after leveling off the previous month. These results also indicate pessimistic prospects for global economic growth in the next few months.
The Coincident Global Economic Barometer fell 3.5 points in July 2022, to 88.9 points. It has now fallen 22.3 points since February of this year. The Leading Global Economic Barometer declined 3.4 points in the month, to 82.5 points. Although they are still significantly higher than during the worst moments of the crises of 2008-09 and 2020, both indicators are at levels only reached during these two recessions in the 21st century. These results affected the whole world, although the decline was most intense in the Asia, Pacific & Africa region.
“The reaction of economic authorities around the globe to price increases throughout production and consumption chains implies the end of the credit stimulus cycle initiated in the pandemic. Reflecting this situation, the Global Barometers’ latest results point to a broad deceleration in the level of global activity across sectors in the second half of the year,” says Paulo Picchetti, a researcher at FGV IBRE.
Coincident Barometer – regional and sector indicators
In August, all regions contributed to the Coincident Barometer’s negative result. The biggest contribution came from the Asia, Pacific & Africa region (2.5 points), followed by Europe (0.9 points). The Western Hemisphere region only contributed 0.1 points to the decline. The drop in the global indicator was partly caused by supply restrictions related to the war in Eastern Europe and the economic slowdown in Asia, which had shown signs of recovery in the previous two months, following the easing of COVID-19 restrictions in China. The further decline in Asia’s coincident indicators suggests that the apparent rebound may have been temporary. The graph in our press release illustrates each region’s contribution to the Coincident Barometer’s distance from 100 points.
The Coincident Barometer declined in all sectors. The biggest drop in the month was in the Construction sector, which fell 4.0 points and reached the lowest level out of all sectors (71.5 points). As a result, all indicators drew even farther from the long-term average of 100 points. The Construction sector is the farthest (28.5 points), while Industry is the closest (9.5 points).
Leading Barometer – regional and sector indicators
The Leading Global Barometer predicts global growth rate cycles between three and six months ahead. In August, the global indicator dropped 3.4 points, to 82.5, the lowest level since June 2020 (60.7). As with the Coincident Barometer, the Asia, Pacific & Africa region contributed the most to the fall (1.9 points). Europe also contributed negatively for the third consecutive month (1.4 points). The leading indicator for the Western Hemisphere was stable in the month, after three months of negative contributions. Expectations for global growth in 2022 have been worsening because of several factors, including the continued war between Ukraine and Russia and the adoption of more restrictive monetary policies in many countries. These factors have helped keep the global indicator in an unfavorable zone.
In August 2022, the Leading Global Barometer fell in four of five sectors. Only the Trade indicator rose, after three consecutive monthly declines. All the indicators are far below the long-term average of 100 points, especially Construction, which is 24.4 points below the neutral level. Trade is doing the best out of all sectors, as it is only 13.6 points below this level.
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