Across the Atlantic, U.S. growth slowed in the second half of a year ago under the weight of a stronger dollar which dragged on exports, and the impact of lower oil prices on the country’s large oil and gas industry.
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The Organization for Economic Co-operation and Development also lowered its outlook for global economic growth to 3.0 per cent in 2017 and 3.3 per cent in 2017 – a decrease of 0.3 for both years.
And while there was no specific mention of Australia in Thursday’s report, it said low prices are depressing commodity exporters.
The Paris-based economics think-tank now estimates Canada’s economy will grow by 1.4 per cent in 2016, slightly more than the 1.2 per cent estimated for 2015 but less than its previous estimate for this year of 2.0 per cent growth.
Meanwhile, OECD said that with China expected to continue rebalancing its economy from manufacturing to services, growth is forecast at 6.5 per cent in 2016 and 6.2 per cent in 2017.
Warning that global growth is faltering so fast there now needs to be a fresh wave of budget spending and interest rate cuts, the OECD demanded governments spend more money on investments and infrastructure, and get serious about productivity-boosting reform. The United States’ Gross Domestic Product (GDP) is expected to be up 2% in 2016 and 2.2% in 2017.
In the euro zone, the positive effect of lower oil prices on activity has been less than expected, the OECD said, while very low interest rates and a weaker euro had yet to lead to sustained stronger investment.
Interest rates in many parts of the world have been cut to attempt to stimulate borrowing and investment. But high levels of private-sector debt and bad loans have hampered bank lending, the OECD said.
In a rare bright spot, the OECD raised its 2016 forecast for India’s growth by 0.1 percentage points to 7.4 percent.
However, Canada would still trail the forecast showings of Britain and the United States, at 2.1 per cent and 2 per cent, respectively.
The global economy is now displaying a number of worrying trends that the organization says warrant close watch.
The so-called “Brisbane Action Plan” involved G20 countries redoubling their efforts to boost the global economy by an extra 2 per cent over five years.
The forecast came in well below a long-run average of around 3.75 per cent, the OECD said, expressing disappointment that advanced economies “in recovery” and emerging economies in “convergence mode” were still failing to produce better results. The low rates should prod governments to borrow more and increase spending, the group said. Several have modified policies to ease labor market restrictions and promote more competition.
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Instead fiscal policy also needed to become expansionary, and structural economic reform accelerated “to strengthen growth and reduce financial risks”.
