Economy Watch: OECD Optimistic about G7 Economies (except Japan)
The OECD sees private-sector investment and trade in the world's biggest economies boosting recovery; non-manufacturing growth continues; and federal budgeting continues to be a mess.
By Dees Stribling, Contributing Editor
The Organisation for Economic Co-operation and Development–OECD, or the club of the world’s wealthiest nations–said on Tuesday that growth in the G7 economies (the world’s most developed ones) appears to be stronger than it previously thought, with accelerating private-sector investment and trade boosting recovery. Except for Japan, that is, so that would mean that the “G7 minus 1” economies are doing better.
The OECD notes that early estimates from Japanese authorities suggest that the loss of physical capital because of the recent disaster will amount to somewhere between 3.3 percent and 5.2 percent of that country’s annual GDP. As a first estimate, growth in Japan might be reduced between 0.2 and 0.6 percentage points in the first quarter of this year, and down by between 0.5 and 1.4 percentage points in 2Q11.
Still, the organization believes things are getting better for the other G countries (the United States, Germany, France, the United Kingdom, Canada and Italy). “Growth perspectives are higher all across the OECD area, and the recovery is becoming self-sustained, which means there will be less need for fiscal or monetary policy support,” says OECD chief economist Pier Carlo Padoan in a statement.
ISM reports slower non-manufacturing growth in March
The Institute for Supply Management said on Tuesday that economic activity in the U.S. non-manufacturing sector grew in March for the 16th consecutive month, according to the organization’s monthly poll of purchasing and supply executives. But the non-manufacturing index was lower: 57.3 percent in March, 2.4 percentage points lower than February’s 59.7 percent.
That means slower non-manufacturing growth, but anything above 50 nevertheless means growth. The New Orders Index decreased 0.3 percentage points to 64.1 percent, and the Employment Index decreased 1.9 percentage points to 53.7 percent, meaning growth in employment for the seventh consecutive month, but at a slower rate.
Interestingly, the Prices Index decreased 1.2 percentage points to 72.1 percent, indicating that prices increased at a slightly slower rate in March. Still, the survey respondents expressed concern over rising costs, most notably for fuel and fuel products, as well as worries about the recent disasters in Japan and the associated supply-chain ramifications.
Federal budget kerfuffle continues
A slew of contradictory reports emerged Tuesday from Washington about the federal debt ceiling: that an agreement had been reached; that there was deadlock; that another kick-down-the-road week-long extension in the form of a continuing resolution was in the works; that such a continuing resolution wasn’t in the cards yet. The upshot of all the confusion was simply confusion.
On the other hand, this particular contretemps might seem like a friendly game of arm wrestling compared with the fight brewing over the fiscal 2012 budget. But will the nastiest quarrel be between the two parties, or between factions within the parties, especially between standard-issue Republicans and those named after a refreshing hot beverage?
On Tuesday Wall Street didn’t seem to care one way or the other about a federal government shutdown, with the Dow Jones Industrial Average up most of the day, only to end down by 6.13 points, or a scant 0.05 percent. The S&P 500 was down a tiny 0.02 percent, but the Nasdaq gained 0.07 percent.
