OECD: Recovery Slowing Down

Global recovery seems to be slowing down more than expected as growth weakens in rich economies, and stimulus should be extended if the slowdown endures noted the Organization for Economic Co-operation and Development (OECD).

The OECD forecast growth across the G7 group of major economies to average an annualized 1.4% in the third quarter and 1.0% in the 4^th, down from 3.2 and 2.5% in the first and second quarters respectively.

What we are seeing is a slowdown in the recovery, which is more or less generalized noted the OECD chief economist Pier Carlo Padoan, and that he saw no evidence of a relapse into recession in any major economy at the moment.

The OECD forecast annualized U.S. growth rates to be 2.0% and 1.2% in the third and fourth quarters, after 1.6% in the second quarter and 3.7% in the first.

Recent high frequency indicators point to a slowdown in the pace of the world economy that is now somewhat more pronounced that it was previously anticipated.

At this point in time, it is not clear as to whether the loss of momentum in the recovery is temporary, or whether the signals are underlying weaknesses in private spending at a time when public support is being removed.

The OECD’s latest forecasts have been limited to forecasting for the G7 countries, however it did say that growth remained robust in large emerging market economies.

Despite the OECD explaining how global recovery is slowing down, this should definitely come at no surprise for anyone, especially for Canadians. There have been a surplus of reports that have been explaining how economic growth in Canada has been slowing down.

If the ongoing slowdown is temporary, then the only response I can think of that would be appropriate would be to postpone the withdrawal of monetary stimulus for a few months. It does not make sense to pull the stimulus if it would only cause damage to the respective economy.

How do you feel about the global recovery situation right now?