The Coincident and Leading Global Economic Barometers show a deceleration in the rate of recovery of world economic activity in December, reflecting the arrival of a second wave of COVID-19 in various countries. The Coincident Barometer interrupts its sequence of increases. The Leading Barometer, which showed optimism in the previous months, is moving towards its long-term average.
The Coincident Global Barometer drops by 1.0 point in December, from 94.7 to 93.7 points, after six consecutive gains. The Leading Global Barometer falls by 7.9 points to 105.7 points. The indicator has been fluctuating since September, but this month’s decrease has been more pronounced, also leading to a drop in the quarterly moving average. The Western Hemisphere moved in the opposite direction and contributed positively to the Coincident Barometer. All regions contribute negatively to the aggregate results of the Leading Barometer.
“Recent advances in the field of immunization have brought about a perspective of resolution to the health crisis, while also exposing the concrete logistical challenges to mass vaccination. Meanwhile, the reality of the resurgence of the pandemic has been felt around the world, leading to the reestablishment of social distancing measures and a consequent reduction in the level of activity, especially in the services sector, which was already recovering at a slower rate than the other sectors. The performance of the leading and coincident barometers in December show that the path to robust economic recovery still has a period of uncertainty ahead associated with the pandemic and the response capacity of economic policies”, evaluates Paulo Picchetti, researcher of FGV IBRE.
Coincident Barometer – regions and sectors
The Coincident Barometer for the Asia, Pacific and Africa as well as Europe regions drops in December, contributing negatively with 0.4 and 0.9 points, respectively, to the result of the general indicator. The increase in the Western Hemisphere continues, but at a progressively lower rate. This month, the region contributes positively to the aggregate result with a rise of 0.3 points. The graph below illustrates the contribution of each region to the deviation of the Coincident Barometer from the historical average of 100 points.
The largest sectorial contribution to the decrease in the Coincident Global Barometer in December comes from Industry, which, nevertheless, sustains the highest barometer value among all sectors. The Trade sector also contributes negatively to the overall result. The remaining sectors contribute slightly positively, while Services remain stable.
Leading Barometer – regions and sectors
The Leading Global Barometer leads the world economic growth rate cycle by three to six months on average. In December, all the regions contribute negatively to the aggregate result, with the largest negative contribution coming from Europe, reflecting the second wave of COVID-19 and its consequences for the recovery of the region’s economies. The second strongest contribution stems from Asia, Pacific and Africa followed by the Western Hemisphere.
In December, the Leading Barometer values for all sectors fell, except the Services sector. The set of variables reflecting the aggregated development of economies (Overall Economic Development) is the most optimistic sectorial barometer, with a value of 114.0 points, followed by Industry (111.6 points), Construction (109.5 points) and Services (105.1 points). Wholesale and retail Trade is the least optimistic sector at the moment, with a value of 85.1 points.
Industry has contributed the most to the decline of the aggregate indicator this month, with almost 6.0 points. The set of variables reflecting the aggregated development of economies (Overall Economic Development) and wholesale and retail Trade contribute 1.0 points, followed by Construction, which contributes modestly. Services was the only sector to contribute positively, albeit with little significance.