Research Briefing | Jul 4, 2024

Advanced economies on the cusp of industrial recovery

Our proprietary business cycle phase indicator reveals that industrial activity in the advanced economies, which has been in recession for the entirety of 2023, is on the cusp of recovery.

What you will learn:

  • Declines in energy prices expected reductions in interest rates, and an end to the destocking cycle will all serve to boost activity. We expect data to confirm a turning point at the midpoint of this year, with the recovery gaining momentum as we move into 2025.
  • The impacts of lower energy costs are already evident, especially in Europe. In Germany, the chemical sector (which accounts for about 7% of total manufacturing) has seen a 5% increase in production since the end of 2023.
  • Because of stickier inflation, the pace of interest rate reductions will be shallower than in previous cycles. As a result, interest-sensitive sectors (such as industrial machinery, high-tech goods, and suppliers of building materials for construction) will take more time to gain momentum.

Oxford Economics proprietary business cycle indicator

Our proprietary business cycle indicator is designed to capture the phases of the global industrial business cycle through time, which gives clues as to the turning point of the current industrial recession and how quickly a recovery might develop.

The indicator measures the acceleration or deceleration of activity in the advanced economies, based on the sequential momentum of a smoothed index of industrial production as well as the rate of change of that momentum.

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