Monday, 16 July 2012

More signs of global economy slowing

Economic data last week provided more indications that the global economy is slowing.

Last week, the Organisation for Economic Co-operation and Development reported that its composite leading indicator for members as a whole fell to 100.3 in May from 100.4 in April. While the CLI for the euro area continued its declining trend, May also saw the CLIs for the United States and Japan fall for the second consecutive month.

OECD composite leading indicators
 Ratio to trend,
amplitude adjusted
Change from previous month
20122012
JanFebMarAprMayJanFebMarAprMay
OECD area100.3100.4100.4100.4100.30.100.080.03-0.03-0.08
United States101.0101.1101.2101.1100.90.250.170.05-0.06-0.17
Euro area99.799.799.699.699.6-0.04-0.02-0.02-0.04-0.06
Japan100.8100.8100.9100.8100.70.120.080.02-0.05-0.10

Reports from the US last week were consistent with a slowing economy. The trade deficit fell by 3.8 percent in May as exports rose 0.2 percent while imports fell 0.7 percent. The Thomson Reuters/University of Michigan index of consumer sentiment fell to 72, the lowest level this year, from 73.2 in June.

In Japan, the Cabinet Office's economy watchers survey showed last week that sentiment in the service sector has deteriorated. The diffusion index for current conditions fell to 43.8 in June from 47.2 in May and the diffusion index for future conditions fell to 45.7 from 48.1.

The outlook for Japan's manufacturing sector may also be weakening. Another report last week showed that machinery orders excluding volatile orders fell by a sharp 14.8 percent in May.

Beyond the OECD area, China's economy has also slowed. It reported on Friday that its economy grew 7.6 percent in the second quarter from a year earlier. This was down from 8.1 percent in the previous quarter and the slowest rate in three years.

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