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Eurozone growth is expected to come from France, Germany and Italy, while China, Brazil, and Russia economies are expected to gain momentum over the coming months. The picture shows Container Terminal Burchardkai in Hamburg, Germany.
Eurozone growth is expected to come from France, Germany and Italy, while China, Brazil, and Russia economies are expected to gain momentum over the coming months. The picture shows Container Terminal Burchardkai in Hamburg, Germany.

OECD Signals Pickup in Global Economic Growth

Global growth is expected to rise to 2.7% from last year’s 2.3% which marked a post-crisis low

OECD Signals Pickup in Global Economic Growth

The world economic engine is expected to stay on course for a pickup in growth this year with surprisingly India being the only exception showing an impending slowdown in growth, data from the Organization for Economic Cooperation and Development leading indicators shows.
The report from the OECD was consistent with expectations from other international economic agencies such as the World Bank which, just a day before forecast the global economy growth to rise to 2.7% from last year’s 2.3% which marked a post-crisis low, FXStreet reported.
The OECD’s leading indicators are forward looking indicators aimed to provide early signals of potential turning points between economic expansion and contraction among the 34-member nations.
The indicators are based on a variety of data points which have a history of showing anticipated swings in the economic activity. Typically, changes signaled by the indicators usually follow a lag of 6-9 months after initial indicators. The Paris-based agency measures different gauges of future activity showing signs of a firm pickup in growth in the US and other developed economies including China and Brazil.
The shift in the pace of growth comes after the leading indicators pointed to a slowdown as early as May last year before indicating a period of stabilization. The latest figures indicate a second straight month of positive growth. The OECD’s composite leading indicator for the 34-nations showed a print of 99.8 in November. A reading below 100 points to slower than normal pace of growth.
The uptick was seen coming broadly with changes in asset prices since Trump’s election victory in November. Investors are betting on US growth and an increase in inflation in response to the election promises on boosting infrastructure and cutting taxes.
Still, despite these expectations, the OECD’s indicators were already hinting that the US economy was on an upward track even before the elections. The data suggested that the US economy was at a bigger risk of showing signs of overheating if the new Trump administration introduced too much stimulus.

 Growth Projection
The International Monetary Fund also projected on Monday that the global economy, especially emerging and developing markets, will pick up pace in 2017 and 2018.
Global growth is projected to be 3.4% in 2017 and 3.6% in 2018, a noticeable increase from the estimated 3.1% growth for 2016.
The growth forecast for the greater Middle East region, which includes both Pakistan and Afghanistan, is 3.1% for 2017 and 3.5% for 2018. The projection for 2017 is 0.3% less than 3.4% estimated in October 2016. In 2018, the region’s growth will be 0.1% less than the IMF’s October 2016 estimate for 2018.

 Gaining Momentum
In the eurozone, growth is expected to come from France, Germany, and Italy, while China, Brazil, and Russia economies are expected to gain momentum over the coming months.
According to the composite leading indicator data, there are tentative signs of growth gaining momentum in the UK despite the impending Brexit, although the OECD notes that the momentum in growth was below trend and would likely remain so until the uncertainty on the Brexit terms is clearer.
Inflation is also set to accelerate in the US, the eurozone and the UK making monetary policy less accommodating as a result. Analysts are of the view that besides the US Federal Reserve, the Bank of England is also likely to stop its quantitative easing or asset purchase program as a first step towards containing inflation close to its 2% target rate.
The first set of GDP reports will be coming starting this week with China reporting GDP figures on Friday while the US and the UK will be reporting the preliminary GDP figures for December towards the end of this month.

 

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