Momentum with India as world economies face slow down

Paris-based research body Organization for Economic Cooperation and Development sees deterioration in developed world

GN Bureau | September 9, 2015


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India is expected to see ‘firming growth’ while growth is set to slow across a number of the world’s largest economies, including China, the US and the UK, according to leading indicators released yesterday by the Organization for Economic Cooperation and Development.

The Paris-based research body said its gauges of future economic activity—which are based on information available for July—also point to slowdowns in Canada, Russia and Brazil. The readings are based on Composite Leading Indicators (CLIs) that are designed to anticipate turning points in economic activity relative to trend.

"In India, the CLI points to firming growth... on the other hand, the outlook continues to deteriorate for China, with the CLI pointing more strongly to a loss of growth momentum," OECD said in a statement.

India's CLI stood at 99.8 in July, slightly higher than 99.7 seen in June. OECD, which is also a grouping of mostly developed nations, noted that signs of slowing growth momentum have re-emerged in Russia while Brazil is expected to witness weak growth momentum. India's economic growth slowed to 7 percent in the three months ended June compared to 7.5 percent expansion recorded in the January-March quarter.

International Monetary Fund (IMF) Managing Director Christine Lagarde recently said that India is among the few bright spots in the global economy.

The continuing slowdown suggested by the leading indicators would spell another disappointing year for the global economy, which has struggled to recover from the effects of the 2008 financial crisis.

The OECD said on Tuesday that its leading indicators suggest the eurozone economy will avoid a slowdown, and signal a pickup in France, which has lagged behind other members of the currency area.

The most pressing concern for G-20 policy makers is the outlook for the Chinese economy, amid signs that an expected slowdown may turn out to be sharper than expected. The OECD’s leading indicator for the world’s second-largest economy fell again in July, to 97.6 from 97.9. A level below 100 signals a slowdown, while a level above signals an acceleration. Those worries have already led to turmoil in global financial markets.

A sign of further slowdown in global economic growth poses a challenge for central bankers, who have seen inflation rates fall far short of their targets in recent years, with a slide into deflation threatening as oil prices once again tumble.

The European Central Bank last week signaled it is prepared to expand its already massive bond-buying program, underscoring an increasing divergence in the monetary policies of the world’s largest central banks.

But the OECD’s leading indicators suggest the eurozone economy will avoid a slowdown and signal a pickup in France, which has lagged behind other members of the currency area. In a statement Tuesday, the European Union’s statistics agency raised its figures for eurozone economic growth in both the first and second quarters.

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 wide variety of data series that have a history of anticipating swings in future economic activity.

The OECD’s composite leading indicator for its 34 members fell to 100 in July from 100.1 in June.

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