Saturday, 11 November 2006

Slow economic expansion lies ahead

The OECD Composite Leading Indicators for September is out.

The latest composite leading indicators (CLIs) suggest that slow economic expansion lies ahead in the OECD area. September 2006 data show improved performance in the CLI’s six month rate of change in the United States and Japan, but weakening performance in the Euro area. The latest data for major OECD non-member economies point to a weakening outlook for Russia and India, moderating growth in China and steady expansion in Brazil.

Morgan Stanley also updated its latest analysts' outlook for the US:

The October rebound in business conditions we reported a month ago proved as short-lived as it was moderate. The Morgan Stanley Business Conditions Index (MSBCI) declined by five points in early November to 40%, reversing most of the October gain. The less-volatile three-month average remained at 41%. At best, our canvass of industry analysts suggests that business conditions are bumping along the bottom, and at worst, the level persisting below 50% suggests deterioration. That stands in sharp contrast with our own expectation that growth is improving in the current quarter.

Meanwhile, the latest indicator from Japan casts doubts on whether the outlook for Japan is really improving. From Bloomberg:

Japanese machinery orders unexpectedly slumped, signaling economic growth may stall and prevent the central bank from raising interest rates, already the lowest among major economies. Stocks fell.

Non-government machinery orders, excluding shipping and utilities, dropped a seasonally adjusted 7.4 percent to 997.5 billion yen ($8.5 billion) in September from a month earlier, the Cabinet Office said in Tokyo today. Third-quarter orders sank 11.1 percent, the biggest decline ever.

As for the expected weakening in the euro area, it may be coming sooner than expected. Again from Bloomberg:

Gross domestic product in France was unchanged from the April-June period, when it expanded 1.2 percent, the most in almost six years, Insee, the national statistics office, said today in Paris. The lowest forecast among the 26 economists surveyed by Bloomberg was for an increase of 0.4 percent...

French industrial production fell 0.1 percent in the quarter after an unexpected drop of 0.9 percent in September, Insee added today. Italian industrial output dropped 1 percent in the month, the national statistics office in Rome said today.

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