World economic barometers reflect cautious optimism despite second wave

World economic barometers reflect cautious optimism despite second wave

The Coincident and Leading Global Economic Barometers rise in January, signaling a continued recovery of global economic activity. The increase in the Coincident Barometer is small and reverses the fall in the previous month. The Leading Barometer increases more noticeably, once again reflecting optimism, which may now be driven by the beginning of vaccination campaigns against COVID-19 in various countries. 

The Coincident Global Barometer increases by 1.1 points in January, from 93.9 to 95.0 points, after last month’s temporary interruption of the upward tendency. The Leading Global Barometer rises by 6.1 points to 111.6 points. All the regions contribute positively to the aggregate result of the Coincident Barometer. For the Leading Barometer, the Western Hemisphere moved in the opposite direction to the other regions, contributing negatively to the aggregate result. 

While the effects of social distancing measures relating to the second wave of the pandemic explain the modest result of the Coincident Barometer, the beginning of the immunization process in some countries justifies the favorable expectations backing up the positive performance of the Leading Barometer. The trajectory of robust growth in economic activity in all the regions and sectors is conditioned by the relative speeds of virus transmission and immunization of the countries' populations over the coming months.”, evaluates Paulo Picchetti, researcher of FGV IBRE.

Coincident Barometer – regions and sectors
The Coincident Barometers of the three regions increase in January, with Europe contributing 0.7 points (or 64%) to the rise in the aggregate result. The second highest contribution comes from the Asia, Pacific and Africa region, which contributes 0.3 points to the result (26%). The value for Western Hemisphere continues to rise, but at a progressively lower rate. This month, it contributes to the aggregate result with 0.1 points. Immunization campaigns against COVID-19 have been launched in various countries in the region, but the temporarily adverse result in the race between vaccination and the pandemic may have influenced the poor result of the regional indicator. The graph in the Press Release 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 rise of the Coincident Global Barometer in January once again comes from Industry. The other sectors contribute modestly, with Trade positively influencing the aggregate result and the set of variables reflecting the aggregated development of economies (Overall Economic Development) as well as the Services and Construction sectors contributing negatively.

Leading Barometer – regions and sectors
The Leading Global Barometer leads the world economic growth rate cycle by three to six months on average. In January, the Asia, Pacific and Africa region is responsible for more than 90% of the increase in the aggregate indicator, followed by Europe, which contributes 0.7 points, or 11%. Only the Western Hemisphere contributes negatively this month, possibly also reflecting the delay in vaccination plans in some countries and the critical pandemic situation in Brazil and the United States. 

In January, all Leading Barometer sectors are facing upswings, with Industry and the set of variables reflecting the aggregated development of economies (Overall Economic Development) being the most optimistic groups (with 120.4 and 115.9 points, respectively). The Trade sector records the highest increase for the month, although it has yet to recover from the losses of the March-May 2020 period, together with Services.
Industry is the sector that contributes the most to the increase in the aggregate indicator for the month, with 4.0 points. Trade contributes with 1.5 points, followed by less noteworthy contributions from the set of variables reflecting the aggregated development of economies (Overall Economic Development), Services and Construction.