Most of the world’s leaders are saying that the global recession is over. But does this correspond to the data? A few leading indicators, both conventional and unconventional, will be examined to determine the outlook of the global economy.

OECD Leading Economic Indicators

The Organisation for Economic Co-operation and Development (OECD) releases its Composite Leading Indicators (CLI) on a monthly basis. Each country’s index is comprised of different statistics. For example, China’s includes items such as the production of chemical fertilizer and the tonnage of cargo handled at ports, while for the United States the interest rate spread and consumer sentiment are measured. Periods of expanding or diminishing economic activity fluctuate around the value of 100, deemed to be the long term economic trend. Movements in the CLI generally precede similar movements in the business cycle.

According to the OECD’s leading indicators there is an overwhelming trend of economic recovery. Countries such as China and India have even eclipsed the 100 mark, suggesting that they are back on track in terms of more long term trends. From the OECD data, it seems that the worst days of the recession have indeed passed.

Baltic Dry Index

The Baltic Dry Index is another way to predict future economic growth. It is published by the Baltic Exchange in London and gives an overview of the marine shipping price for raw materials worldwide. This is a useful indicator because the availability of cargo ships is relatively stable, whereas the need for international shipments in dry goods—things like coal, metals, and grains—varies considerably depending on economic activity. An increase in shipping activity means an increase in future output.

This index collapsed in late 2008, but has since recovered. It is now listed at over four times its previous value in January 2009. This largely agrees with the OECD leading indicators in reflecting a wide-ranging recovery for the world economy. The Baltic Dry Index can be tracked on Bloomberg.

Skyscraper Index

This one is less conventional. The Skyscraper Index is a measure based more on casual observation than statistical analysis. The argument behind it is that the construction of record-breaking towers is often initiated just before an economic crisis. Ground was broken on the Singer Building and Metropolitan Life Building before the panic of 1907; the Empire State Building’s construction in New York corresponded with the Great Depression; the Sears Tower in Chicago preceded the downturn of the 1970s; just before the Asian financial crisis there were the Petronas Twin Towers in Malaysia; and more recently, there was the Burj Dubai before its city’s debt problems.

If the soothsaying behind this index is correct, it doesn’t bode well for China. The country will see new towers such as the Shanghai Center, the 117 Tower in Tianjin, the Ping An Insurance skyscraper in Shenzhen, and the China World Trade Center Tower 3 in Beijing within the next few years. These projects come at a time when some have warned of the possibility of asset bubbles in China. A slowdown in this rapidly growing economy would have adverse effects on the rest of the world.

For the sake of optimism thus, following the conventional indices is recommended.