Tuesday, 14 September 2010

Global economy still slowing

The global economy remains headed towards slower growth.

On Monday, the Organisation for Economic Co-operation and Development released its report on composite leading indicators (CLIs) showing that the CLI for the OECD area fell by 0.1 point in July. In its report, the OECD said that the indicators for July "point to clearer signs of a moderation in the pace of expansion compared to last month’s assessment".

OECD composite leading indicators
 Ratio to trend,
amplitude adjusted
Change from previous month
OECD area103.3103.2103.3103.2103.
United States102.5102.8102.9102.7102.
Euro area103.8104.0104.1104.1104.

Other recent reports support the view of a slowing global economy.

Last week, reports from Japan had shown that its economic growth is weakening. While the composite coincident index crept up to 101.8 in July from 101.3 in June, the composite leading index fell to 98.2 from 99.0. The Cabinet Office's economy watchers survey showed that the diffusion index for current conditions fell to 45.1 in August from 49.8 in July while the diffusion index for future conditions plunged to 40.0 from 46.6.

Last Friday, the Economic Cycle Research Institute reported that its weekly leading index for the United States economy rose to 122.0 for the week ended 3 September from 120.5 the week before. The annualised growth rate of the index, though, edged up to just minus 10.1 percent from minus 10.2 percent the week before. The growth rate has been hovering around minus 10 percent for the past two months, well down from over 20 percent at the beginning of the year.

On Monday, the European Commission released its interim forecast showing that it forecasts growth in the euro area to slow from 1.0 percent in the second quarter to 0.5 percent in the third quarter and to 0.3 percent in the fourth quarter. The EU noted in its report that while growth in the euro area has "surprised markedly on the upside", weaker global growth is likely to dampen export growth in Europe.

Update on 22 September: One of the references to the composite leading index in the fourth paragraph has been corrected to refer to the composite coincident index.

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