Global Barometers | World economy slowdown running its course

The Global Barometers fall once again in August, signalling a slowdown in world growth for this quarter. The Coincident Barometer decreases for the seventh month in a row, while the Leading Barometer drops again after remaining stable in the previous month. The results reflect a bleak perspective for world economic growth in the coming months.

The Coincident Global Economic Barometer declines 3.5 points in August 2022, to 88.9 points, accumulating a 22.3-point decrease since February of this year. The Leading Global Economic Barometer drops 3.4 points for the month, reaching 82.5 points. Although the levels are well above those of the worse moments of the crises of 2008-09 and 2020, both indicators are now at levels that have only been reached during these two global recessions of the 21st century. The results are spread across the different regions of the world, with a more intense fall in the Asia, Pacific, and Africa region. 

“The reaction of economic authorities around the globe to elevated prices along the production chains and for consumers means the end of the cycle of credit stimuli begun during the pandemic. Reflecting on this scenario, the most recent performance of the Global Barometers indicates a generalized slowdown in the level of global activities across all sectors along the second semester”, evaluates Paulo Picchetti, researcher of FGV IBRE.

Coincident Barometer – regions and sectors 

In August, all regions contribute to the negative result of the Coincident Barometer. The largest contribution comes from the Asia, Pacific, and Africa region, with -2.5 points, while Europe contributes -0.9 points and the Western Hemisphere -0.1 points. The decrease in the global indicator is partly caused by supply restrictions related to the war in Eastern Europe and the economic slowdown in Asia, which had shown signs of recovery in the previous two months after the restrictions on mobility adopted in China as a measure to combat an outbreak of Covid-19 were lifted. The new decline in the coincident indicator for the region suggest that the apparent recovery may have been temporary. The 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. 

Among the coincident sector indicators, the decline is spread across all of them. The negative standout for the month is the Construction sector, which dropped 4.0 points and has now the lowest level among all sectors (71.5 points). With this result, all the indicators move further below the historical mean of 100 points, with the Construction sector being the most distant (28.5 points below) and Industry the least distant (9.5 points below).

Leading Barometer – regions and sectors 

The Leading Global Barometer leads the world economic growth rate cycle by three to six months on average. In August, the global indicator drops 3.4 points to 82.5 points, the lowest level since June 2020 (60.7 pts). As with the Coincident Barometer, the Asia, Pacific, and Africa region contributes most to the decline, with -1.9 points. Europe also contributes negatively for the third consecutive month (-1.4 points), while the indicator for the Western Hemisphere remains stable this time after three months of negative contributions. Global growth expectations for 2022 have been worsening in light of, among other factors, the ongoing conflict between Ukraine and Russia, inflationary pressures and the associated adoption of more restrictive monetary policies in various countries. 

In August 2022, four of the five Leading indicator sectors are declining. Only the indicator for Trade increases this month after three consecutive falls. All the indicators remain far below the historical mean of 100 points, especially Construction, which is 24.4 points below neutral. With 13.6 points, Trade is the least distant from the historical mean.