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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Jun 05 2014

Europe’s Core: The German Cyclical Outlook

Germany’s economy is the largest in Europe so its business cycle swings carry great weight. Its GDP grew by 0.8 percent in Q1 2014, doubling its pace from the previous quarter and making it the strongest showing in three years. However, German unemployment unexpectedly rose for the first time since November 2013, and the Ifo Business Climate Index fell more than expected in May to a five-month low. Which data points tell us more about the state of the German business cycle?

Actually, neither, since they are both roughly coincident indicators. However, ECRI has just updated its German Long Leading Index (GELLI), which provides a better answer. The value of this index lies in its ability to anticipate cyclical turns in economic growth before conventional leading indexes, and as such reveals whether the German economy is gaining momentum or again falling back.

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Cognitive Dissonance at the Fed?

ECRI May 30, 2014

As Fed and CBO trend growth estimates fall to the Fed’s 2% recessionary stall speed, how does economy reach escape velocity? More