Are there any signs of a recovery in economic conditions as parts of the world resume some form of normality from the COVID-19 pandemic? One gauge of economic conditions is the Composite Leading Indicators (CLI) from the Organisation of Economic Cooperation and Development (OECD). The Indicators are designed to provide early signals of turning points in business cycles. Wool prices have, to some extent at least, followed the trends in the CLI measure for China and the major advanced wool consuming economies (the US, Germany, Italy, the UK, France and Japan). The good news is that the latest data for the CLI suggests economic activity has rebounded strongly in China, while there has been a rebound in the major advanced economies, albeit more modest than for China.
Both sets of leading indicators plummeted earlier this year as COVID-19 hit. The drop was particularly marked in China which imposed a stringent lockdown and was milder across the advanced economies due to milder form of lockdown. As can be seen, the CLI has bounced back, particularly for China. This provides some encouragement that these better economic conditions will help support retail demand and, in time, raw wool prices.
Further details, including a chart showing the Composite Leading Indicators for the advanced wool consuming countries and for China compared with the trends in prices for Australian fine wool, are given in the full edition of the Weekly Newsletter. Available to NCWSBA members.