OECD leading indicators flash growth warning
Developed economies are set to slow down, but Asian giants’ prospects improve
The world’s developed economies are set for a slowdown, although prospects for Asian giants China and India have brightened, according to leading indicators released Monday by the Organization for Economic Cooperation and Development.
Economic growth in the Parisbased research body’s 35 members accelerated in the three months through June after a weak start to the year, thanks to a surge in U.S. activity that was partly driven by tax cuts and government spending increases.
However, the OECD’s gauges of future activity, based on data for July, suggests growth is set to
steady in the U.S. and Japan, while slowing in Europe. “Composite leading indicators... point to easing growth momentum in the OECD area as a whole,” the
research body said.
In July, the CLI for the OECD fell further below the 100.00 mark that indicates growth is set for its long-term trend rate.
The measure had been above that mark until April, and before May last fell below that level in August 2015.
The leading indicators are designed to provide early signals of turning points between the expansion and slowdown of economic activity, and are based on a variety of data series that have a history of anticipating swings in future economic activity. The changes in economic activity signaled by the indicators usually follow six to nine months after they are recorded.
The global economy last year enjoyed its strongest expansion since 2011, and is expected to slow only slightly this year. An August measure of global activity in the manufacturing and services sectors compiled by data firm
IHS Markit fell to its lowest level since March.
The OECD’s indicators suggest that slowdown may continue into 2019, although they also pointed to accelerations in China and India that could be strong enough to offset a mild deceleration in rich countries.
With the economic expansion in the U.S. now entering its 10th year, some policy makers have become more alert to signs of an eventual decline in activity, including movements in bond yields that have in the past foreshadowed recessions. But while there are signs that global growth is coming off its recent peak, there are few that suggest that slowdown will be sharp.