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A More Global GLI: Easing from Very High Levels

- "Our Global Leading Indicator (GLI) has become an essential part of our toolkit and
arguably the most critical indicator in our overall monitoring of the state of the cycle and
of cyclical assets. It has continued to guide us well through the deep and unusual events of the last two or three years."
- "The global economy has changed significantly since we first introduced the GLI in 2002, prompting us to revise it comprehensively in 2006. And, while the 2008-2009 crisis and recession proved an excellent ‘stress-test’ for the GLI, another four years on, we have once again improved both its components and underlying methodology, to better reflect the new global economic landscape. The improved GLI is now more global, better correlated with the industrial cycle and more stable."
- "Our improved GLI comes at a particularly important time for assessing the cycle. We
have been highlighting for some time now that the original GLI was indicating some slowing in momentum. The improved version shows this message more clearly, with a peak in the headline already visible. This suggests that the pace of industrial growth is set to decelerate, although from extremely high levels, an outcome that would be consistent with our GDP forecasts."
- "Markets are increasingly focused on what this kind of slowing in momentum will mean. Moderation in growth at this point in the cycle is generally consistent with lower but positive returns, rather than with significant negative returns. Although our US forecast is still firmly below consensus, our global forecast does not envisage a sharp slowdown. That said, we will continue to pay close attention to the incoming data on this front, starting with the new release of the GLI tomorrow."
GoldmanSachs Global Economics Weekly 20100630

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