BRIC in Despairs except India

iStock_000011680638_XXXLarge---600x450By Edward Leung

According to the latest Composite Lending Indicators (CLIs) released by OECD, except India, where high infrastructure spending is spearheading the country’s growth, economies of the once-most worshipped BRICs, are slowing in growth.

Designed to anticipate turning points in economic activity about the trend, the CLIs illustrate overall growth momentum of an economy over 5-10 years’ period. According to OECD’s definition, the turning points of CLIs tend to precede its economic activity about the trend by approximately six months. The horizontal line at 100 represents the trend of economic activity.

As per the release, The CLIs signal stable growth momentum in the Euro area as a whole, particularly in Germany and Italy, while growth is firming in France.  Stable growth momentum is also anticipated in Japan with India’s CLIs pointing to firming growth.

On the other hand, the outlook continues to deteriorate for China, with the CLIs pointing more strongly to a loss of growth momentum. Signs of slowing growth momentum are also re-emerging in Russia. In Brazil, weak growth momentum is anticipated.

OECD’s estimation is echoed by leading analysts in the financial and the commodities market. Russ Koesterich, Chief Investment Strategist for BlackRock, wrote in his weekly analysis, “More evidence last week of weakness in the world’s second-largest economy, China. A manufacturing gauge hit a three-year low, while China’s service PMI also disappointed, falling sharply from July’s level. ”

“China’s weakness is being felt well beyond its borders, particularly in commodity-reliant countries. Both the Russian ruble and Brazilian real have come under significant pressure lately, although in the case of the real this arguably is as much about domestic political issues as commodity prices. ”

All in all, data suggests that the slowdown in the “commodities economies” of the BRIC nations will not see a major recovery before the end of the year. BM

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Note: The above graphs show country specific composite leading indicators (CLIs). Turning points of CLIs tend to precede turning points in economic activity about the trend by approximately six months. The horizontal line at 100 represents the trend of economic activity. Shaded triangles mark confirmed turning-points of the CLIs. The blank triangles mark provisional turning-points that may be reversed. Source: OECD