The latest round of leading indicators from the OECD continue to paint a pretty picture of solid momentum and fairly good GDP growth for the first part of 2014. There is no signs of changes in growth in these indicators, which is all important to markets. That said, they are not fool-proof, with it worth questioning the EU trajectory in particular.
It would appear that the indicators for the US are starting to peak, although these data are only to October, with indicators like consumer sentiment and the ISM index recovering post the government shutdown.
The ongoing strength in the EU index is probably worth questioning the most, given the signs of recovery from the most recent recession have not been particularly vibrant. To be sure, the leading indicators are not foolproof and are revised. Given the nature of the EU's most recent malaise, it probably makes sense that recovery is a bit slower than previous downturns, which is perhaps not captured in these data.
There are better signs in emerging economies that suffered greatly mid-year when capital flows turned negative, with signs of a bottom in India and improvement in Brazil. It will be interesting to see whether this can continue when tapering becomes a reality.
To me it makes sense that the worst is over, because a big part of the adjustment in debt markets has already happened even though the taper from the Fed hasn't.
The China leading indicator really looks to be lagging reality, with the signs of a bottom already taking place in the actual industrial production data it is designed to track. If anything, momentum is showing tentative signs of weakening. Really this indicator from the OECD can be ignored.
Global industrial production should continue to pick up pace from the current 3.3%YoY pace. A lot of that is about the weak comps of this time last year and the falls in Europe and Japan turning into small gains.
It's near impossible to forecast a worse year in 2014 than this year, but the key for markets will be looking for a change in current momentum and how that matches expectations. So while this is all bullish, a change in momentum will be very important to all markets
