OECD inflection point

The latest round of OECD leading indicators has shown that while major developed countries continue to grow, we have hit an inflection point in terms of the trajectory of improvement from weaker activity in mid-2013. In other words, the best period of growth momentum is starting to look like it is now behind us.

The OECD leading indicators are far from foolproof and are subject to revision.  To be sure, they total missed the depth and duration of the crisis back in 2008, although you wouldn't know that looking at the data today.

Looking at recent history, there have only been a couple of instances where periods a change in the second derivative into negative territory has been brief. Other leading indicators suggest this won't be one of those periods.

Looking at the major developed markets, the data suggest that growth momentum in the US and Japan has peaked, while the EU indicator continues improve.  That said, Europe is coming off a lower base, with other key indicators of manufacturing like the PMI now tending to settle in only mildly positive territory.

The importance of this for commodity markets is while ex-China markets will still be a positive in demand/supply balances, the rate of improvement has slowed quite a lot.  So it seems unlikely that manufacturers are going to be caught off-guard with inventories that are too low.  For markets where supply growth is decent, this puts pressure on China, which is currently weak.