Economy Watch: OECD Forecasts Continued Tepid Growth
- Sep 16, 2014
The Paris-based Organization for Economic Co-operation and Development released its latest forecasts for economic growth in various parts of the world on Monday, revising them downward in some cases, especially for the euro zone. The OECD projects that the U.S. will grow by 2.1 percent this year and by 3.1 percent in 2015, while the UK will grow at 3.1 percent in 2014 and 2.8 percent in 2015, and Canadian growth will be 2.3 percent and 2.7 percent those respective years.
By contrast, the organization believes the euro zone will grow only 0.8 percent in ’14 and a 1.1 percent in ’15. Growth prospects differ widely among the major euro area economies, with Germany seeing 1.5 percent growth in both years, and France up by 0.4 percent this year and 1 percent next. Italy will suffer a contraction of 0.4 percent this year and experience a bare gain of 0.1 percent in 2015. Given the low-growth outlook and the risk that demand could be further sapped if inflation remains near zero, or even turns negative, the OECD recommends “more monetary support for the euro area.”
While emerging economies will continue to grow much faster than the advanced ones, the OECD forecasts for those parts of the world are similarly uneven. For instance, China is expected to grow by 7.4 percent in 2014 and 7.3 percent in 2015, while India will grow by 5.7 percent this year and 5.9 percent in 2015. But Brazil will eke out only 0.3 percent growth this year, having fallen into recession in the first half of the year, and the 1.4 percent growth next year.
U.S. industrial production off slightly
The Federal Reserve reported on Monday that its index of U.S. industrial production edged down 0.1 percent in August, while the index for manufacturing output decreased 0.4 percent. The declines were the first for each index since January, and the gains in July for both indexes were revised downward.
The declines in both total industrial production and in manufacturing output in August reflected a decrease of 7.6 percent in the production of motor vehicles and parts, which had jumped more than 9 percent in July. Excluding motor vehicles and parts, factory output rose 0.1 percent in both July and August. The production at mines moved up 0.5 percent in August, while the output of utilities rose 1 percent.
At 104.1 percent of its 2007 average, total U.S. industrial production in August was 4.1 percentage points above a year earlier, the central bank noted. Capacity utilization for total industry decreased 0.3 percentage points in August to 78.8 percent, which is 1 percentage point above its level a year ago, but 1.3 percentage points below its long-run (1972–2013) average.
Separately, the New York Federal Reserve issued its latest report on manufacturing in the state (one of the major regional reports on the subject), the Empire State Manufacturing Survey, which points to business activity expanding at a robust pace for New York manufacturers. The general business conditions index rose 13 points to 27.5, a multiyear high. The new orders index moved up three points to 16.9, and the shipments index advanced two points to 27.1.
Wall Street ended the day mixed on Monday, with the Dow Jones Industrial Average up 43.63 points, or 0.26 percent. The S&P 500 lost 0.07 percent and the Nasdaq sank by 1.07 percent.