OECD CLI Suggest Slow Down In Recovery

The Composite Leading Indicators (CLIs) published by the OECD for April 2011 suggest a slight loss of momentum in most major economies with the US the exception. Stability in the pace of expansion was suggested in Germany and the UK but France, Italy and Canada show signs of a slowdown. Signs of a slowdown also appear in China, Brazil, India and Russia.

OECD CLIs Show Signs Of Expansion

The composite leading indicators of the OECD countries for February 2011 signify continued expansion in the economies of most member countries. The OECD area annual growth rate was 1.8% compared with the Euro area 1%. The trend of expansion is continuing in Germany and the United States. The rate of expansion seems to be slower but stable in the UK. France and Canada are possibly regaining momentum but Italy may be losing momentum.

Russia seems to be continuing its current economic expansion phase while China shows signs of more moderate economic activity. India is pointing towards a slowdown but Brazil should remain near its long-term potential. The Major 5 Asian economies grew by 0.2% over the last year and the Major 7 by 2.1%.

CLI Shows Signs Of A Peak In US Economy

The OECD composite leading indicators for August suggest that economic expansion is continuing to slow down. The CLI decreased by 0.1 point in August for the fourth month in a row. A downturn is expected in Canada, France, UK, Italy, Brazil, India and China. Expansion is indicated for Germany, Japan and Russia. The US is showing signs of a peak in economic activity.

Moderate Growth Expected In OECD

The latest OECD composite leading indicators statistics signify a moderation in the rate of expansion compared to last month. The index for the OECD was down 0.1 in July 2010.

The downturn predicted for Canada, France, Italy, UK, China and India means that the signs suggest a slower rate of economic growth than was anticipated for last month. The outlook for Brazil, US and Japan is that they will possibly peak and their expansion may lose momentum. The German and Russian economies are expected to expand as are the OECD and the Euro areas. The OECD area last peaked in February 2008 and troughed in May 2009 along with the Euro area which last peaked in March 2008.

OECD Economic Outlook Is Uneven Growth

The May OECD Economic Outlook says growth is gradually increasing in the OECD area but at different rates across different regions, especially in emerging-market economies. Risks in global recovery may even greater now. The upturn is in large part due to keeping markets open, pulling the economy out of recession.

The emerging economies are experiencing a re-opening of imbalances. China, however, is an example of strong domestic demand preventing a large external surplus rising to pre-crisis levels. Appropriate policies are still required to address global inequalities. The G20 is given as being potentially important in identifying and implementing a set of policies for more sustained and balanced growth. International collaboration will also be required for progress in financial market reform.

Even though growth has been taking place, unemployment has increased by over 16 million in the OECD area over the last two years but it is less than expected. Employment growth prospects in some European economies and Japan are weak. A jobs recovery could take place with appropriate cost-effective labour market and social policies that support workers in danger of long-term unemployment.

Instability in sovereign debt markets and overheating in emerging market economies are significant risks that may jeopardise the recovery. Monetary policy should be returned to normal as soon as possible and support removed. Exit strategies must take account of fiscal consolidation so as not to put pressure on interest rates. Much of the turbulence has been calmed by the response of euro-area governments and the European Cenral Bank though underlying weaknesses remain and structural adjustments will have to be made.

Euro area architecture will have to be strengthened considerably to get rid of doubts about the viability of monetary union raised by the sovereign debt crisis. Domestic policies should be strengthened for more competitiveness but fiscal discipline is also important. Spending cuts must preserve the cost-effectiveness of programmes helpful to growth. Consolidation strategies must include structural reforms for growth.

Reforms of labour and product markets should be implemented for an increase in output, innovation and to prevent increases in unemployment.

Expansion Slowdown Expected To Continue

The slowdown in economic expansion is set to continue according to the OECD Composite Leading Indicators for May 2010. The deceleration continued into the 10th month with an increase of 0.1% point.

France, Italy, China and India seem to have reached a peak in the growth cycle and signs of a peak are emerging in Canada the UK and Brazil. Ongoing expansion is still taking place in Germany, Japan, the US and Russia but at a slower pace. The ASEAN coutries are generally gaining momentum of recovery.

OECD Points To An Expansion Slowdown

The Composite Leading Indicators from the OECD for March 2010 suggest that where the economic expansion has been taking place there may be a slowdown in the pace. Most of the signs of expansion and recovery say the OECD have been tentative but in France and Italy the signs are stronger. There is also a possibility that expansion may also be slowing in Brazil and China.

The CLI indicator for the OECD area as a whole was 0.6 points up in March 2010 with the US increasing by 0.8 and Japan by 0.9 points. The euro area increased by 0.5. Brazil and China both decreased by 0.3 points indicating the possible halt to expansion in China and to recovery in Brazil. India and Russia increased slightly by 0.3 and 0.6 points respectively.

OECD Economies Continue Expanding

The Composite Leading Indicators (CLI) for January released today (5 March 2010) from the OECD seem to show that the economic recovery and expansion that has been taking place in the OECD economies is continuing. The improvement in economic activity in the G7 is only marginally better than that for December.

The index for the OECD area increased by 0.8 points in January 2010, 11.3 points higher than January last year. The increase was evenly distributed between the 'Triads', the US, 11 points, the Euro area up 12.5 points and Japan 10.7 points. The statistics show that all G7 economies are in an expansion phase but Brazil and India and in a recovery phase, even though the 5 major Asian economies combined are expanding.

Continued Recovery In The OECD

Indicators from the OECD continue to point to recovery in OECD economies. The composite leading indicators (CLI) for Canada, France, Italy, Germany and the UK all suggest more expansion in the business cycle than last month. In these OECD economies the main drivers of expansion are finance and business confidence. Non-member economies are also doing better with all major non-members in the recovery phase of the business cycle.

The CLI for OECD countries increased 1 point in October 2009 which is 5.7 points higher than the same period last year and the outlook is for recovery. The UK CLI increased by 1.3 points in October which was 8.8 points higher than last year and the outlook is expansion. The Euro area increased by 1.3 points, 8.8 points higher than last year. The US CLI increased 1 point, 3.9 points higher than last year. France was 10.2 points up on last year, Germany 9.2 and Italy 12.5 points up on last year.

Among the non-members China's CLI had increased 0.2 points in October and 5.7 points on last year, India 0.2 and 4 respectively, Russia increased 1.6 points in the month but was 1.1 points lower over the year and Brazil had increased by 0.7 points in October and decreased 4.2 points since October 2008.

The outlook for the OECD economies is one of recovery and for the Euro area expansion. The economies of Canada, France, Germany and Italy are also expected to expand and G7 and Asian economies are expected to be in the recovery phase as are the major non-member economies. It should also be noted that any signs of recovery contained in the data are more concerned with recovery happening rather than any suggestion of the strength of the recovery.