OECD Says Slowdown `More Pronounced' Than Anticipated
OECD Chief Economist Pier Carlo Padoan
Andrew Harrer/Bloomberg
The OECD’s chief economist Pier Carlo Padoan, said, “Recent high-frequency indicators point to a slowdown in the pace of recovery of the world economy that is somewhat more pronounced than previously expected.”
The OECD’s chief economist Pier Carlo Padoan, said, “Recent high-frequency indicators point to a slowdown in the pace of recovery of the world economy that is somewhat more pronounced than previously expected.” Photographer: Andrew Harrer/Bloomberg
The global economic recovery is proving slower than projected and policy makers may need to extend or bolster stimulus programs to support it, the Organization for Economic Cooperation and Development said.
Recent data suggest the economy of the Group of Seven nations could grow at an annualized rate of about 1.5 percent in the second half, below the 1.7 percent previously envisaged and the 3 percent rate of the first six months of the year, the Paris-based organization said today.
“Recent high-frequency indicators point to a slowdown in the pace of recovery of the world economy that is somewhat more pronounced than previously expected,” Pier Carlo Padoan, the OECD’s chief economist, said in a report.
The outlook comes as investors signal worries that the global rebound from last year’s recession is fading as stimulus ebbs and governments look to cut back record budget deficits. The MSCI World Index of stocks is down about 9 percent since mid-April.
If the slowdown is temporary, then policy makers should postpone the withdrawal of monetary support for a few months, while maintaining plans to cut fiscal deficits to reassure investors, the OECD said. If growth is threatened for longer, then central banks may need to buy assets and commit to near- zero interest rates for a long period and governments may need to delay budget cuts, it said.
The OECD projected growth in the G-7 economies of 1 percent in the final three months of the year on an annualized quarter- on-quarter basis. That would be the slowest since the second quarter of last year, and below the 1.4 percent projected for the current quarter.
German Growth
The U.S.’s expansion will slow to 1.2 percent in the next quarter from 2 percent, the report said. Japan will grow 0.6 percent and 0.7 percent in the last two quarters of the year, while German growth will accelerate to 1.1 percent from 0.7 percent, the report said.
Italy will contract 0.3 percent this quarter before expanding 0.1 percent in the next three months, and French growth will fade to 0.3 percent from 0.7 percent, the OECD said. The U.K. will expand 2.7 percent in the third quarter before slowing to 1.5 percent in the fourth quarter and Canada will grow 2.2 percent and 2.3 percent over the two periods, it said.
Private consumption may be constrained as consumers tackle their debts and worry about unemployment, the report said. Weak growth and doubts about the ability of governments to pay their debts may hurt the financial system, it said. The recoveries in world trade and housing markets are also losing momentum, it added.
At the same time, low levels of private investment mean it’s unlikely to weaken much further, emerging markets are showing robust growth and overall financial conditions have stabilized, it said.
Underlying inflation continues to moderate in major OECD economies amid excess capacity, while price pressures have surfaced in large emerging-market economies, it said.
To contact the reporters on this story: Simon Kennedy in London at skennedy4@bloomberg.net; Gregory Viscusi in Paris at gviscusi@bloomberg.net.
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