GOLDMAN: The Global Economy Is No Longer Decelerating

Goldman Sachs Global Investment Research

Goldman Sachs analysts track a proprietary index used as a proxy for global growth called the "Global Leading Indicator," or GLI.

After a few months of deceleration, the GLI was unchanged in March.

"This ends six months of slowing and locates the global industrial cycle on the cusp of the 'Expansion' phase," says a team of Goldman analysts led by George Cole in a note to the firm's clients.

The GLI is made up of 10 components, half of which improved last month, while the other half deteriorated.

"On the positive side, the Consumer confidence aggregate rebounded after last month's decline," say the analysts.

"Korean exports improved and U.S. Initial Jobless Claims also trended lower. The Belgian and Netherlands Manufacturing Survey and the Baltic Dry Index showed some strength as well. On the negative side, the S&P GSCI Industrial Metals Index® continued to drop sharply, while the AUD & CAD TWI aggregate was only marginally lower. The Global PMI and the Global New Orders less Inventories (NOIN) aggregates were also softer (primarily on account of still soft EM activity) and the Japan Inventory/Sales ratio, while still at strong levels, deteriorated slightly."

Goldman expects the GLI to continue its move into the "Expansion" phase, which it describes as "generally the most supportive for risky assets," in the coming months.

"We have been expecting a turn back into 'Expansion' as the chilling effect of adverse weather in the first quarter fades," say the analysts.

"The March Advanced GLI had already highlighted a reacceleration in activity growth in a smaller set of the components, which has now begun to show up in a broader, more global set of indicators."