OECD: Slowdown is going global

 
Tim Wallace
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MAJOR economies across the globe are set to slow down further over the next six months, according to an influential leading index published yesterday, raising fears of a prolonged recession in the UK and Eurozone.

The downturn is focused on the Eurozone, according to the figures from the Organisation of Economic Cooperation and Development (OECD), where May’s data show a continued slump.

Italy’s index fell most sharply, dropping 0.19 per cent in the month to May and 2.71 per cent in the year to hit 98.9 – firmly below the 100 level which indicates the country’s long-term trend rate of growth.

France’s index also dropped 1.25 per cent on the year to 99.6 while Germany’s slumped 2.47 per cent to 99.4, and the Eurozone as a whole slid 1.7 per cent to 99.6.

The OECD uses forward looking data including business sentiment, consumer confidence and job expectations to estimate economic growth in six months’ time, showing a gloomy outlook for the rest of 2012.

The slowdown has also spread to the UK – its index fell 1.54 per cent in the year to 99.7.

“We believe it is more likely than not that the UK economy contracted modestly in the second quarter, thereby suffering a third successive decline,” said economist Howard Archer from IHS Global Insight, although he expects some growth in the third and fourth quarters.

“Tight fiscal policy and still significant problems for consumers (including ongoing muted earnings growth, high unemployment and a need for many to deleverage) are expected to continue to limit UK economic activity. Furthermore, ongoing Eurozone sovereign debt problems and weakened economic activity are expected to continue to weigh down on UK recovery prospects.”

Further afield, the US growth spurt is showing signs of running out of steam – its index fell to 100.9, from 101.1 in April and 101.2 in February.

India and China’s fell to 97.8 and 99.2 respectively, while Russia’s growth is set to remain just above its trend rate, with an index of 100.3.

Brazil was the only nation to buck the trend, with a reading of 99.2 – up 0.16 per cent on the month.