Cooperating Economics

In the middle of March, the Organization for Economic Co-operation and Development (OECD) produced its most recent Interim Economic Assessment.  While the group has become relatively more optimistic, it is still expecting just moderate growth for world’s output.  The OECD has some constructive things to say about Japan, Europe, the U.S., and India, while it anticipates deceleration in China.

Most of the OECD’s newfound optimism is a result of the group’s expectations for positive outcomes from recent central bank actions in Europe and Japan, and they also feel America’s current expansion has reason to continue as well.  They see the euro area and Japan benefiting from stronger growth rates and point to recent indicators as evidence of this development.  They have upgraded their forecast for 2015 growth in the euro area to 1.4 percent from 0.3 percent in November, and now expect Japan’s growth to hit 1.0 percent this year after predicting 0.2 percent during the same period.  In all, the OECD estimates monetary easing of the past few months has positively affected countries accounting for roughly half of global output.  In addition to central bank measures, the group feels lower oil prices will stimulate economies of countries that are net importers of the fuel, like America.  According to the report, India will become the world’s fastest growing economy, overtaking China.  The economy of the People’s Republic is experiencing a rebalancing, partially away from real estate, which caused the OECD to call for deceleration in the world’s second largest economy.

To say their outlook is optimistic would be an exaggeration.  Like many professional forecasters, the OECD is responding to the marginal changes in the inputs of their models.  Traditionally, easier monetary policies and falling energy prices are good for countries that are not overly tied to energy production.  However, even their upgraded projections continue to demonstrate the global economy is stubbornly improving, hardly cooperative.     (by C. Cox)