The OECD’s G7 leading indicator is estimated to have fallen further in May, signalling that global economic weakness will extend. A tiny glimmer of hope, however, is that the rate of decline appears to be easing. This is consistent with the view here, based on monetary trends, that economic momentum will reach a low in the third quarter, though with little revival in late 2019.

The OECD will release May data for its leading indicators on 8 July but information is available for most of the components, allowing an independent calculation. The indicators are presented in ratio-to-trend form, so a stable reading signals economic expansion in line with trend, while a fall implies weak growth or outright contraction. The G7 leading indicator is estimated to have fallen for a fourteenth consecutive month in May – see chart.

The six-month rate of change, however, appears to have bottomed in February, edging higher for a third month in May. Momentum turning points in the leading indicator have preceded those in industrial output by 4-5 months on average historically. The February low, therefore, suggests that output momentum will bottom in June-July.

This is similar to the message from monetary trends: global six-month real narrow money growth bottomed in October-November 2018, suggesting a July-August low in output momentum, allowing for the historical average 9-month lead.

The “big picture” is that no recovery – in the sense of a return to trend growth – has yet been signalled by either monetary trends or the leading indicators.

The June Conference Board consumer survey provides more evidence that economic weakness is spreading to the labour market. An indicator combining assessments of current and future job-finding difficulty rose to a 14-month high, suggesting an increase in the unemployment rate from the current 3.6% – see chart. The median projection of FOMC participants for the fourth quarter of 2019 was revised down from 3.7% to 3.6% at last week’s meeting – a likely overshoot supports expectations of rate cuts over the remainder of 2019.