OECD Leading Indicators Flash Warning on EuroZone

        LONDON--Economic growth is set to slow in the eurozone, according to leading indicators released Monday by the Organization for Economic Cooperation and Development, placing the currency area at risk of a slide back into contraction.
        The Paris-based research body said its gauges of future economic activity--which is based on information available for October--also pointed to slowdowns in the U.K. and Russia, while suggesting growth in most of the world's other large economies will remain at current rates over coming months.
        The leading indicators add to concerns that economic activity may once again start to decline in the eurozone. The currency area emerged from 18 months of falling output in the second quarter of 2013, but has struggled to embark on a significant recovery. Its economy grew by just 0.2% in the third quarter, having expanded by 0.1% in the second.
        "In the euro area the CLI (composite leading indicator) continues to indicate a loss of growth momentum, particularly in Germany and Italy," the OECD said. "Stable growth momentum, however, is expected for France."
        The warning signal from the leading indicators follows the release of surveys of manufacturers and service providers that showed private sector activity grew at the slowest pace in 16 months during December. The number of people without work rose for a second straight month in October, while the annual rate of inflation returned to a five-year low in November.
        Speaking at an event in Frankfurt, Monday, European Central Bank Governing Council member Ewald Nowotny said there has been a "massive weakening" of the eurozone's economic momentum.
        Responding to the prospect of continued low growth and inflation, European Central Bank President Mario Draghi Thursday opened the door to a dramatic escalation in the bank's campaign to stimulate the eurozone's near-stagnant economy, but he deferred any moves until early 2015 amid signs of continuing divisions over the right course of action.
        The OECD's composite leading indicator for its 34 members was unchanged at 100.4 for the second straight month. Separate national gauges point to slowing growth in the U.K., "albeit from relatively high levels," while it said there are signs that Russia will slow further.
        India was the only large economy to see a rise in its leading indicator, signaling a pickup in growth over coming months. The OECD said its gauges for China and Brazil all pointed to stable growth.
        The OECD said there were "tentative signs of a positive change in momentum" in its leading indicator for Japan. The economy surged in the first-quarter ahead of a rise in the sales tax in April as households brought forward purchases, and then contracted just as dramatically in the second quarter. It also contracted in the third quarter.
        The OECD's leading indicators are designed to provide early signals of turning points between the expansion and slowdown of economic activity, and are based on a wide variety of data series that have a history of signaling changes in economic activity.
        Write to Paul Hannon at paul.hannon@wsj.com
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        (END) Dow Jones Newswires

        December 08, 2014 06:20 ET (11:20 GMT)

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