Economy Watch: Global Forecast from OECD; Fed Reports on U.S. Industrial Production
- Sep 16, 2014
The Paris-based Organization for Economic Co-operation and Development released its latest global forecasts for economic growth 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 U.K. will grow at 3.1 percent in 2014 and 2.8 percent in 2015. Canadian growth will be 2.3 percent and 2.7 percent in those years.
By contrast, the organization believes the euro zone will grow only 0.8 percent in this year and 1.1 percent in 2015. 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 year. 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 advanced ones, the OECD forecasts for those countries are 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 after falling into recession during the first half, and will manage only 1.4 percent growth in 2015.
US Industrial Production Dips
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 the industrial sector decreased 0.3 percentage points in August to 78.8 percent, which is 1 percentage point higher than 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, considered one of the major regional reports on the subject. The survey points to business activity expanding at a robust pace for the state’s manufacturers. The general business conditions index rose 13 points to 27.5, a multi-year 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.