OECD indicator slips further for US economy

Tuesday, 9 June 2015 00:02 - - {{hitsCtrl.values.hits}}

Paris (Reuters): US economic growth is showing further signs of weakening while a recovery is gaining traction in euro zone countries such as France and Italy, the Organisation for Economic Co-operation and Development said on Monday.

The OECD’s monthly leading indicator, a measure designed to flag turning points in the international economy, showed dips for the United States and other key economies such as China and Brazil.

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The indicator, a synthetic index where 100 is the long-term average, remained at 100.7 in the euro zone but eased to 99.5 from March’s 99.7 in the United States, having fallen below 100 in February. China’s reading declined to 97.5 from 97.7 and Brazil’s to 99.0 from 99.1.

The index, the latest of which is dated April, rose in Japan to 100.0 from 99.9 while it dropped in Britain to 100.0 from 100.1.

Within the euro zone, the index rose France to 100.8 from 100.7 and in Italy to 101.0 from 100.9. The reading for Germany, the bloc’s biggest economy, rose to 99.9 from 99.8 a month earlier.

Japan GDP unexpectedly accelerates in Q1 as firms boost investment

Tokyo (Reuters): Japan’s economy expanded much faster than initially expected over January to March as companies ramped up capital investment, underscoring the central bank’s view that recovery from last year’s recession is gaining momentum.

The economy grew an annualised 3.9% in the first three months of this year, Cabinet Office data showed on Monday, handily beating a preliminary estimate of a 2.4% gain, and topping a median market estimate for 2.7% growth.

“This is a pretty positive figure and shows the recovery is picking up pace,” said Chief Economist at Norinchukin Research Institute Takeshi Minam.

“Non-manufacturers are boosting spending on expectations that private consumption will recover, so this should serve as a key driver of growth,” he said.

Capital spending rose 2.7% from the previous quarter, much more than a preliminary estimate of 0.4% growth and bigger than a 2.3% expansion projected in a Reuters poll.

Taking advantage of a weak yen, a number of Japanese manufacturers are shifting production back to Japan from China and elsewhere. Panasonic has pulled back some production of room air-conditioners and Canon has repatriated some output of high-end copiers.

Analysts say record profits and ample cash have finally started spurring firms such as industrial robot maker Fanuc Corp to increase capital investment.

The data is welcome news for the government and the Bank of Japan, which are hoping that expectations of a steady economic recovery will spur companies and households to boost spending.

A pick-up in capital expenditure is key for the success of premier Shinzo Abe’s stimulus policies, which aim to reflate the economy out of stagnation by changing companies’ perception that deflation will persist.

“The Japanese economy is returning to growth orbit,” Abe’s spokesman Yasuhisa Kawamura told reporters on the sidelines of a summit of Group of Seven leaders on Sunday.

The upgrade reflected a Ministry of Finance survey issued last week, which showed corporate capital spending grew in January-March at the fastest pace in a year.

The MOF survey, which is used to calculate revised GDP data, showed a notable increase in non-manufacturers’ spending.

Rapid expansion of online and mobile businesses is driving investment on distribution and inventory networks by retailers and wholesalers, while hotels and theme parks are renovating to draw in customers, including foreign tourists attracted by a weak yen.

“Non-manufacturers may also be investing more on automation to meet a shortage of labour,” noted Norinchukin’s Minami.

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