The Global Barometers fall due to the war in Europe and the increases in COVID-19 cases in China

The Global Barometers fall due to the war in Europe and the increases in COVID-19 cases in China

The Global Barometers decrease in April, likely reflecting shocks such as the war in Ukraine and the increase in the number of COVID-19 cases in China. The Coincident Barometer is now below the historical mean of 100 points for the first time since February 2021. In addition, the more noticeably drop in the Leading Barometer signals the perspective of a stronger deceleration in world growth for the coming months. 

The Coincident Global Economic Barometer falls 6.1 points in April to 99.2 points, the lowest level since January of last year (97.2 pts), while the Leading Global Economic Barometer decreases 6.3 points, to 86.9 points, the lowest level since July 2020 (74.2 pts). The decline of the Coincident indicator is influenced mainly by the Asia, Pacific, and Africa region. The drop in the Leading indicator is motivated almost exclusively by the worsening of perspectives in European countries. 

The uncertainties regarding the effects of the conflict in Europe were already being felt in March and have intensified in April, with impacts on the supply chain that are likely to intensify the generalized price increase in the vast majority of countries. As a result, the global coincident and leading barometers record further decreases in April, signalling difficulty in maintaining the recovery of activity level, even in the services sector, which had been benefitting from the relaxation of mobility restrictions in the context of better figures regarding the covid pandemic. The return of these restrictions in the Asia region increases uncertainty regarding activity level in the coming months”, evaluates Paulo Picchetti, researcher of FGV IBRE.

Coincident Barometer – regions and sectors

In April, all three regional indicator bundles decrease. The Asia, Pacific, and Africa region contributes negatively 3.7 points (61%) to the fall in the Coincident Global Barometer. The indicator for Europe contributes -1.9 pts. and the Western Hemisphere contributes only -0.5 points. The drop in the regional indicators reflects a change in the assessment of the current economic growth in the face of the worsening pandemic development in China and the idea of continued COVID-19 risk, in addition to the outbreak of the Russia-Ukraine war and its first impacts on the economy. The 2nd graph in the Press Release illustrates the contribution of each region to the deviation of the Coincident Barometer from the historical mean of 100 points.

All the coincident sector indicator bundles decrease this month. The largest fall stems from the Industry and Construction sectors, with marginal losses of over 8.0 points, followed by Trade which declined 6.2 points. With these results, three of the five sector indicators are now below their respective historical mean of 100 points.

Leading Barometer – regions and sectors

The Leading Global Barometer leads the world economic growth rate cycle by three to six months on average. Europe contributes 6.0 points (95%) to the 6.3-point decrease in the global indicator. The Western Hemisphere contributes -0.5 points, while the indicator for the Asia, Pacific, and Africa region increases and contributes 0.2 points in the opposite direction. Europe records its lowest level since July 2020 (68.3 pts.). This result suggests that growth expectations for the coming months have been strongly revised, with increased pessimism after the outbreak of the war between Russia and Ukraine.

In April 2022, there is a fall in all Leading indicator sectors, except Construction. Industry declines more than 12 points to 87.3 points, its lowest level since July 2020 (82.7 pts). In addition to the existing problems in industrial supply chains in various countries, extension of the conflict in Europe adds further uncertainties regarding performance of the sector. In the other sectors, the impact until now is smaller.