OECD indicators point to continuing slowdown

Most major economies will continue to slow in the coming months, with only Brazil and the U.K. set to experience a moderate pickup, according to the Organization for Economic Cooperation and Development's composite leading indicators.

The indicators, which have proved reliable in the past, suggest that it will be some months before global economic growth begins to recover, and they make further central-bank action to support activity more likely.

The Paris-based think tank Thursday said its leading indicator of economic activity in its 34 developed-country members fell to 100.2 in July from 100.3 in June.

"Composite leading indicators … show that the loss of momentum is likely to persist in the coming quarters in most major OECD and non-OECD economies," the OECD said.

Among developed economies, the main locus of weakness remains the euro zone, where the economic contraction that began in the second quarter appears set to continue. But the leading indicators for both the U.S. and Japan also fell and "show signs of moderating growth," the OECD said.

Among the Group of Seven leading developed economies, the U.K. was alone in recording a rise in its composite leading indicators, a development the OECD said "tentatively" points to a pickup in growth.

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 signaling changes in economic activity.

The other main exception to the overall downward trend was Brazil, which saw its leading indicator rise in July. The composite leading indicators for China and India were unchanged, while that for Russia fell sharply, developments the OECD said indicate that growth will slow in all three.

In another release, the OECD said that the combined gross domestic product of the Group of 20 leading economies grew by 0.6% in the second quarter, a slowdown from the 0.7% rate of growth recorded in the first three months of the year. The leading indicators suggest G-20 growth will continue to slow in coming quarters.

The OECD said Italy once again suffered the largest contraction—a 0.8% decline in output—while China and Turkey recorded the largest expansions, with GDP rising by 1.8% in both countries.

(Published by WSJ - September 13, 2012)