By Kate Stratford of the Bank’s International Economic Analysis Division.
Global activity is a key driver of UK economic growth. Official estimates of world GDP and trade are only available with a lag, but more timely global indicators can give an early steer on growth. Global indicators have been useful in predicting large swings in world activity and have been particularly helpful since the onset of the financial crisis. A combination of these indicators has performed much better at tracking world GDP and trade growth since 2008 than a simple benchmark model. The global manufacturing PMI export orders index has been the single best indicator during this period.
Nowcasting world GDP and trade using global indicators