Global Economic Barometers continue to decline

Both indicators have fallen in January and reached levels that, excluding the worst moment of the COVID-19 crisis, had not been observed since 2009. This month’s result was driven down by the Asia, Pacific & Africa region.
Economics
11 January 2023
Global Economic Barometers continue to decline

The Global Economic Barometers continue to signal a sharp slowdown in the world economy at the beginning of 2023. Both indicators have fallen in January and reached levels that, excluding the worst moment of the COVID-19 crisis, had not been observed since 2009. This month’s result was driven down by the Asia, Pacific & Africa region.

In January 2023, the Coincident Global Economic Barometer fell 3.3 points, to 76.5, the lowest level since July 2020 (68.5). The Leading Global Economic Barometer declined 2.1 points, to 79.6, the lowest level since June 2020 (59.6). As a result, the coincident indicator has now been below the leading indicator for two months in a row. The decline in both indicators was caused by a worsening of the economic environment in the Asia, Pacific & Africa region, while the other regions’ results improved slightly.

“The persistence of the inflationary process around the world at the beginning of the year reinforces our expectation that the cycle of monetary tightening that started in 2022 will be even longer. The resulting deceleration in the level of activity is the cost of this disinflation process, already captured by the coincident barometer, and also for the coming months, as reflected in expectations underlying the leading barometer,” says FGV IBRE researcher Paulo Picchetti.

Coincident Barometer – regional and sector indicators

In January, the Asia, Pacific & Africa region contributed 3.6 points to the decrease in the coincident indicator, while the Europe and Western Hemisphere regions made positive contributions of 0.2 and 0.1 points, respectively. The sharp deterioration in the Asia, Pacific & Africa region reflected the dramatic COVID situation in China and its economic and social consequences in that country. The maintenance of low levels of regional indicators is another sign that economic growth will be sluggish in early 2023. The graph below shows each region’s contribution to the Coincident Barometer’s distance from 100 points.

Breaking down the Coincident Barometer by sector, Services, Industry and General Economy (aggregate assessments by consumers and businesses) fell in January, while Commerce and Construction moved in the opposite direction. All sector indicators are far below the long-term 100-point average, suggesting a widespread economic slowdown across sectors.

Leading Barometer – regional and sector indicators

The Leading Global Barometer predicts global growth rate cycles between three and six months ahead. For the second consecutive month, only the Asia, Pacific & Africa region contributed to the indicator’s decline, now to the tune of 3.8 points. The Western Hemisphere and Europe regions made positive contributions of 1.0 and 0.7 points, respectively. However, all the indicators still point to a dim outlook for economies in the coming months. The Asia, Pacific & Africa region now has the lowest level out of all regions, for the first time since June 2022.

In January, the Leading Global Barometer fell in the Industry, Commerce and Construction sectors, while it rose in the General Economy and Services sectors. These indicators also signal pessimism about the coming months across all sectors.

The full study is available here.

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