OECD data tells export economist that weather's worsening

THE leading indicator of the rich country club, the Organisation of Economic Cooperation and Development (OECD), points to a weakening global economy, says Export Development Canada chief economist Peter Hall, who describes what's happening as a peak followed by a plunge, a partial rebound and then a slowdown that is already happening.

"The OECD indicator peaked in April, and has since slid into a gradual decline that so far has lasted three months. If the indicator is correct, the second-quarter slowdown in the US, Japan, and in certain Western European economies is only a taste of what's ahead, said Mr Hall in his weekly commentary.

"Few indicators describe the world economy's recent movements as neatly as this barometer. Its track record is solid. It foresaw the recession in the early 1990s and the slow recovery, the hiccup in global GDP in 1998 and the almost-recession in 2001. It captured the drama of the economic plunge in 2008-09 and the subsequent aggressive rebound," he said.

"Trade-intensive emerging markets will likely be first to show signs of weakening. China is already there, with second-quarter GDP weakening to an annual pace in the eight per cent range, from over 11 per cent in the previous quarter. Other smaller emerging economies have shown similar signs, but the exceptions are Brazil and India, which had hefty pre-recession stimulus measures and are less trade dependent," said Mr Hall.

"It seems that the pause in the OECD leading indicator will persist for a few months until balance is restored in developed markets. With over 50 per cent of the world experiencing extended weakness, it is difficult to believe that most emerging markets could escape the effects," he said.

"A key lesson of this recession is the synchronisation of global growth and the increased co-dependence of markets near and far. As such, this nascent slowing is not to be taken lightly," said Mr Hall.
(Source:www.schednet.com)