Global Economic Recovery Still On Track
The CLI published by OECD aims at providing early signals of turning points in business cycles – fluctuations of economic activity around its long term potential level. The CLI is constructed so as to map the four phases of the cycle. Expansion is signaled by the CLI increasing and above 100 while recovery is signaled by CLI increasing and below 100. Slowdown is signaled by CLI decreasing and below 100 while downturn is signaled by CLI decreasing and above 100. More specifically the CLI for the United States increased by 1.6 points in August 2009, while the Euro area’s CLI increased by 1.7 points. Similarly, the CLI for Canada increased by 1.7 points in August, while the CLI for the United Kingdom increased by 1.6 points. With the starting index values for these areas being below 100 in the previous month, these increases point to recovery. However, France's and Italy's CLI trends point to a potential expansion as they increased 1.3 and 2.0 points, respectively, with the starting values of the index being above 100 in the previous month. It should be kep in mind that although the CLIs published by OECD attempt to predict movements in the output gap, they should not be interpreted as providing exact forecasts.
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