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US recession could be short-lived – Liberum industrials indicator

08 January 2016 | Analyst Insight

(LONDON) The US recession currently affecting the world’s equipment and machinery makers could prove surprisingly short-lived, exclusive data from the Capital Goods team at independent London-based investment bank Liberum suggests. 


Liberum’s proprietary monthly Early Cycle Indicator is based on analysis of 20 years of data and it reveals that December 2015 was the second consecutive month when the ratio of U.S. new orders-to-inventories among the world’s metal bashers exceeded 1.10, the highest level since 2014. 

“History shows that orders recover without exception when this happens,” said Daniel Cunliffe, Liberum’s European Capital Goods Analyst. 

The data implies a return to order expansion within six months. 

“We remain bearish on the sector as we expect deflation to continue,” Daniel added. Last year, Liberum’s ECI data underpinned a view that the sector would face a downturn commencing the second quarter of 2015. Institute for Supply Management data indicates that US manufacturing has been in recession since November 2015. 

“We struggle to identify recovery drivers at this stage, but we cannot ignore the strength of the US data, which has led to an industrial order recovery on all seven occasions between 1985 and last year,” Daniel said. 

The Indicator, created by Daniel, weights new orders from the Purchasing Managers Indices versus inventories in Europe (50% of the Index), the US (30%) and China (20%). 

The ECI is 80% correlated with volume growth at giant global industrial firms and can offer a six-to-nine month lead on trends. 

The early cycle refers to the critical period after a recession when companies buy smaller items such as ball bearings or drill bits for products sold, or projects delivered, in the near term. Late cycle refers to major capital expenditure such as factories and power plants that meet rising demand from the early circle.


Liberum is an independently-owned pan European investment bank. The firm’s core activities are research, sales and trading in large, small & mid cap pan-European equities, as well as investment banking and advisory services including IPOs, secondary issues and mergers and acquisitions.

  • Liberum’s team of 43 research analysts cover more than 300 European stocks across nine key sectors
  • Liberum was recognized as the #1 firm in the 2015 Thomson Reuters StarMine Awards for UK & Ireland, achieving the top-three positions across all industries for overall stock picker
  • Liberum is broker to more than 70 listed companies across 20 sectors and has raised £1.6bn for its corporate clients in 2015 YTD
  • The firm was established in 2007, and employs over 160 people in London and New York
  • Further information is available at

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