Growth in the world’s leading economies is expected to slow in the coming months as the initial bounce back from Covid-19 subsides, the Organisation for Economic Co-operation and Development (OECD) has warned.
The agency said composite leading indicators (CLIs), which are driven by high-frequency data such as order books, confidence indicators, building permits, long-term interest rates, new car registrations, signalled a post-pandemic growth peak in November and December.
The latest CLIs suggest that peak has now passed in several major economies, the OECD said.
Momentum
A drop in momentum is visible in the latest CLIs for Canada, Germany, Italy and the United Kingdom, it said.
In Japan and the euro area as a whole, the CLIs signal stable growth, the OECD said, though the peak in the indicators has also passed while in the US, the CLI also indicates stable growth, although the CLI level is now below its long-term trend.
The CLI for China (industrial sector) continues to point to a loss of momentum and has now dropped below its long-term trend, the agency said.
China’s economy rebounded in 2021 with its best growth in a decade, helped by robust exports, but there are signs that momentum is slowing on weakening consumption and a property downturn, pointing to the need for more policy support.
Growth
Growth in the fourth quarter hit a one-and-a-half-year low, government data showed on Monday shortly after the central bank moved to prop up the economy with a cut to a key lending rate for the first time since early 2020.
The world’s second-largest economy is struggling with a rapidly cooling property sector, as well as sporadic small-scale Covid-19 outbreaks that could deal a blow to its factories and supply chains.
“Persisting uncertainties from the ongoing Covid-19 pandemic, notably from the impact of the Omicron variant on recent monthly indicators, may result in higher than usual fluctuations in the CLI and its components,” the OECD said.
“ As such, the CLIs should be interpreted with care at this time and their magnitude should be regarded as an indication of the strength of the signal, rather than a precise measure of anticipated growth in economic activity,” it said. - Additional reporting Reuters
