June 21, 2021

O.E.C.D. Says Growth in Developed Countries to Accelerate

PARIS — Economic growth among developed nations is likely to accelerate in the first half of this year as strength in the United States and Japan help to compensate for the continuing malaise in Europe, the Organization for Economic Cooperation and Development said Thursday.

“The global economy weakened in late 2012 but the outlook is now improving for O.E.C.D. economies,” the organization’s chief economist, Pier Carlo Padoan, said in the report.

The Group of 7 industrialized nations alone will grow at an annualized 2.4 percent in the first quarter and 1.8 percent in the second, the report estimated. G-7 nations shrank by 0.5 percent overall in the fourth quarter of 2012.

Mr. Padoan said “bold policy action,” particularly from the monetary authorities, was still needed to ensure growth, particularly in Europe.

The O.E.C.D., which is based in Paris, forecast that the U.S. economy would rebound in the first quarter to grow 3.5 percent on an annualized basis from the last three months of 2012, when growth was just 0.1 percent. The U.S. economy also appears to be on track for second-quarter growth of around 2.0 percent, the report said.

Japan, which under its new prime minister, Shinzo Abe, has committed to attacking deflation with all the resources at its disposal, will rebound to 3.2 percent growth in the first quarter of 2013 and 2.2 percent in the second quarter, the organization said. Japan’s economy grew just 0.2 percent in the October-December period.

But for Europe, hobbled by the seemingly endless euro crisis and budget-balancing measures, as well as joblessness and weak demand, “a meaningful recovery is likely to take somewhat longer,” the organization said. It predicted there would be a decided divergence between the economy of Germany, which is forecast to rebound strongly in the first half, and the rest of the region, which “will remain slow or negative.”

It predicted that Germany would post first-quarter growth of 2.3 percent, accelerating to 2.6 percent growth in the second quarter. The German economy shrank 2.3 percent in the last three months of 2012.

France, the second-largest euro zone member after Germany, will probably remain moribund, the report said, shrinking by about 0.6 percent in the first quarter before eking out 0.5 percent growth in the April-June period. The French economy shrank 1.2 percent in the fourth quarter.

Britain will manage first-quarter growth of 0.5 percent and 1.4 percent in the second quarter, after slipping 1.2 percent in the fourth quarter of last year, the report said.

The organization said growth from developing nations would continue to outpace the advanced economies, with China alone expected to simmer along at a level “well above 8 percent” in the first six months of the year.

Noting the still-fragile state of confidence and widespread unemployment, “bold policy action to support activity remains necessary in all major O.E.C.D. economies,” Mr. Padoan said. Given tight government finances, monetary policy remains a key instrument for supporting demand,” adding, “even though monetary stimulus may not always be sufficient and carries its own risks.”

Jacques Cailloux, chief European economist at Nomura in London, said that the O.E.C.D.’s overall forecasts appeared to be “considerably” more optimistic than most private forecasters were expecting.

“For the U.S., Japan and Germany the first half looks to be very strong,” he said.

Mr. Cailloux also said he expected the 17-nation euro zone economy to decline about 0.8 percent in 2013 from a year earlier, and that – so far, anyway – the boiling crisis in Cyprus had not led him to downgrade that already dismal view.

“Our forecast assumed some pretty large shocks and uncertainty,” he said. “Obviously Cyprus is a shock, it’s greater than we expected, but so far it hasn’t affected our broader outlook.”

Article source: http://www.nytimes.com/2013/03/29/business/global/oecd-says-growth-in-developed-countries-to-accelerate.html?partner=rss&emc=rss

Germany’s Low Jobless Rate Stokes Inflation Fears

On a seasonally adjusted basis, unemployment fell below three million people for the first time since 1992, as Germany continued to benefit from strong exports of autos and other products.

The news came a day after estimates that inflation in Germany rose to an annual rate of 2.5 percent this month, well above the European Central Bank’s goal of 2 percent. The drop in unemployment also highlighted the divergence between booming Germany and slow growth in most of the rest of Europe.

Monetary policy in the euro zone is probably too loose for Germany, some economists say. But the European Central Bank cannot raise its benchmark rate too much without creating problems in the weakest countries, like Greece and Ireland.

“I see a long-term risk that Germany could overheat,” said Jörg Krämer, the chief economist at Commerzbank in Frankfurt. “It’s an ugly situation for the E.C.B.”

Earlier this month, the central bank raised its official rate to 1.25 percent, the first increase since 2008. The appropriate rate for Germany would be closer to 3 percent, Mr. Krämer said.

The euro has risen steadily against the dollar since January because of expectations that the central bank will continue to raise rates, in part because of the need to slow the German economy. On Thursday the euro rose to just short of $1.49, its highest level since the end of 2009, before falling back slightly.

Higher interest rates tend to push up the euro’s value by making it more attractive for investors to own euro assets.

As unemployment in Germany falls, companies may need to pay more to attract workers, which could further fuel inflation. , home to the carmakers BMW and Daimler, jobless rates were only about 4 percent in April. Companies report problems finding skilled workers.

Still, various factors could limit wage inflation. Mr. Krämer noted that most union wage contracts did not expire until next year. In addition, beginning in May companies will be able to freely hire people from European Union countries like Poland or the Czech Republic. And jobless rates in much of eastern Germany remain above 10 percent. All those factors could limit wage inflation.

However, Mr. Krämer said: “The time of ultralow wage increases in Germany is definitely over.”

Jean-Claude Trichet, the European Central Bank president, has consistently denied that there is any inherent problem in fashioning a monetary policy that fits fast-growing countries like Germany as well as poorer members of the euro zone.

Speaking to reporters earlier this month, Mr. Trichet said Germany’s return to growth after years of stagnation was good for its neighbors.

“We had an episode of a return to competitiveness, of hard work, and now we see the result of this hard work,” Mr. Trichet said in Frankfurt on April 7. “It is good for Germany and good for the euro area as a whole.”

While seasonally adjusted unemployment fell below three million, the absolute number of jobless people remained above that milestone, at 3.08 million. Economists consider the seasonally adjusted number to be a more reliable indicator of the strength of the economy.

In any event, the absolute number of jobless people will probably fall below three million next month, economists said.

Article source: http://feeds.nytimes.com/click.phdo?i=745d8ff4d20317212697ed62620dc27e