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US: OECD leading indicators point to a bleaker picture – Westpac

FXStreet(Delhi) – Richard Franulovich, Research Analyst at Westpac, notes that the latest OECD leading indicators do not make for happy reading on the US and global economy.

Key Quotes

“Both consensus and the Fed may have revised up 2015 growth expectations in recent weeks but within that a clear slowing in the industrial sector is playing out. The 3, 6 and 12 month growth rates in the OECD’s leading index for the US are all negative. The 3mth annualised growth rate has now been negative for 11 consecutive months, the longest stretch since the 2007/2008 financial crisis, though on the positive side the pace of slowing appears to be moderating. The dislocation in the US energy patch and the strong USD are of course the main headwinds.”

“US regional PMIs tell an even weaker story, the Philly, Empire and Richmond surveys for September all slipping into negative territory and flagging risks of a sub-50 manufacturing ISM for September due Oct 1 next week. The PMI’s if anything signal an accelerating slowdown in the US manufacturing sector into the tail-end of Q3.”

“The services sector should understandably outperform, but it won’t be completely immune. Many have drawn parallels with 1997/98, when EM growth slowed sharply, commodity prices tumbled and the USD rose sharply, a similar external backdrop to what confronts the US economy today.”

“A relatively stronger US services sector is already apparent in the PMIs but the risks still seem skewed to weaker services sector ISM updates in coming months.”

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