OECD Indicators Signal Stronger Economic Growth
By Paul Hannon
The global economy is on course for a pickup in growth this year, with only India showing signs of an impending slowdown, according to leading indicators released Wednesday by the Organization for Economic Cooperation and Development.
The Paris-based research body's gauges of future activity showed firmer signs of a pickup in growth in the U.S. and other developed economies, as well as large developing economies such as China and Brazil.
The signal from the leading indicators is consistent with the expectations of some other international economic policy bodies, with the World Bank Tuesday forecasting that global economic growth would pick up to 2.7% from last year's postcrisis low of 2.3%.
As recently as May, the leading indicators for the U.S. were pointing to a slowdown in growth. They then switched to signal a stabilization, but the latest figures based on information available in November mark the second straight month in which they point to a pickup.
Changes in asset prices since Donald Trump's election as the next U.S. president indicate that investors expect U.S. growth and inflation to increase next year in response to a promised boost to infrastructure spending and tax cuts. But the OECD's indicators suggest the economy was already on an upward track before the election, and is therefore at greater risk of overheating if it receives too much stimulus from the new administration.
The main exception to the global pickup signaled by the leading indicators is India, which the OECD said is "showing signs of easing growth momentum." In early November, Prime Minister Narendra Modi voided all 500- and 1,000-rupee notes to drill out cash piles held by tax cheats and bribe-taking bureaucrats. India's government expects economic growth to slow in the fiscal year through March 2017, but those forecasts don't incorporate the impact of the cash cancellation.
By contrast, the leading indicators now point to a stabilization in Italy's economic growth, having pointed to a slowdown in October.
The OECD's leading indicators are designed to provide early signals of turning points between the expansion and slowdown of economic activity, and are based on a variety of data series that have a history of anticipating swings in future economic activity. The changes in economic activity signaled by the indicators usually follow six to nine months after they are recorded.
The OECD's composite leading indicator for its 34 members was steady at 99.8 in November. A reading below 100.0 points to growth that is slower than normal.
Write to Paul Hannon at firstname.lastname@example.org
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January 11, 2017 06:14 ET (11:14 GMT)Copyright (c) 2017 Dow Jones & Company, Inc.