Global Barometers improve slightly but remain at subdued levels

The Global Barometers rise only slightly in May, reflecting continued weakness in global economic activity in most countries and moderate optimism, partly related to the gradual recovery of the Chinese economy. 

The Coincident and Leading Global Economic Barometers increase by 0.9 and 0.6 points, respectively, in May 2023. The slight increase is mainly due to the performance of the Asia, Pacific & Africa and Western Hemisphere regional indicators in the case of the Coincident Barometer, and the Asia, Pacific & Africa region in the case of the Leading indicator. With these results, both indicators continue to fluctuate below their historical average of 100 points, with the Coincident Barometer closing the month at 86.1 points and the Leading Barometer at 95.1 points. 

“The results of the Global Barometers for May indicate continued growth in world economic activity, albeit with a low probability of significant acceleration. If, on the one hand, the normalization of supply chains has reduced the effects of supply on inflation, on the other hand, the performance of the labour market has been pressuring prices on the demand side, generating reactions from the monetary authorities that end up limiting expectations of more intense growth in the level of activities”, evaluates Paulo Picchetti, researcher of FGV IBRE.
Coincident Barometer – regions and sectors

In May, the Asia, Pacific & Africa region and the Western Hemisphere contribute 0.6 and 0.4 points, respectively, to the increase in the Coincident indicator, while Europe contributes negatively with -0.1 point. The three regional indicators are in the 80-90 point range, reflecting the impact of monetary tightening in most countries, in parallel with the gradual recovery of the Chinese economy. The graph below shows the contribution of each region to the deviation of the Coincident Barometer from its historical average of 100 points. 

With the exception of Services, all the Coincident sector indicators increase this month. With this result, Trade records the highest level among the sectors, followed by the general state of the Economy (aggregated business and consumer evaluations). The Construction indicator records a second consecutive increase, accumulating more than 17 points in the April-May period, further reducing the gap to the other sectors. 

Leading Barometer – regions and sectors   

The Leading Global Barometer leads the world economic growth rate cycle by three to six months on average. In May 2023, only the Asia, Pacific & Africa region contributes positively to the result, with 2.3 points, while Europe and the Western Hemisphere contribute negatively, with -1.0 and -0.6 point, respectively. The gap between the indicators for the Asia, Pacific & Africa region and the Western Hemisphere is more than 16 points, suggesting improved economic growth expectations in the former, while the inflationary environment and high interest rates suggest a more pessimistic outlook for the Western Hemisphere countries.

The sectoral leading sector indicators show contrasting results in May, with the Economy and Services rising and Construction, Industry and Trade falling. The Economy indicator, which reflects aggregated business and consumer assessments, reaches a level above 100 points, its highest level since August 2021 (112.9 points), while Construction, which had accumulated an increase of over 10 points over the previous three-months, fell sharply in May, moving away from the levels of the other sectors.