A moderate expansion is underway in most major advanced and emerging economies, but growth remains weak in the euro area, which runs the risk of prolonged stagnation if further steps are not taken to boost demand.

1. 15th September 2014, Paris
Rintaro Tamaki, Deputy Secretary-General & Acting Chief Economist
OECD INTERIM GLOBAL
ECONOMIC ASSESSMENT
http://www.oecd.org/economy/economicoutlook.htm

2. Global growth, though bumpy, continues at a moderate pace
2
World GDP
Percentage change, seasonally adjusted annualised rate
Source: OECD National Accounts database.
Global PMI Index
Note: Values above 50 indicate expansion.
Source: Markit.
0
1
2
3
4
5
0
1
2
3
4
5
48
50
52
54
56
58
48
50
52
54
56
58

3. Trade growth remains sluggish
Volumes, year-on-year percentage change
Global trade in goods and services
Source: OECD National Accounts database.
3
-20
-15
-10
-5
0
5
10
15
20
-20
-15
-10
-5
0
5
10
15
20
Pre-crisis average (1990-2007)

4. Labour market slack is still substantial in the advanced economies
OECD employment
Per cent of working age population
Real wages and labour productivity
Annualised percentage change, Q2 2009 – Q1 2014 4
Note: Real wage is employee compensation divided by total hours worked in the economy, deflated by the CPI. Labour productivity is real GDP divided by hours worked.
Source: OECD calculations based on quarterly national accounts and OECD May 2014 Economic Outlook database .
Source: OECD May 2014 Economic Outlook database .
53
54
55
56
57
53
54
55
56
57
-0.5
0.0
0.5
1.0
1.5
-0.5
0.0
0.5
1.0
1.5
United States
Japan
Euro area
Real wage
Labour productivity

5. There are signs of a stabilisation of growth rates in emerging market economies
5
GDP growth and Composite PMI
-6
-4
-2
0
2
4
6
8
10
12
14
40
42
44
46
48
50
52
54
56
58
60
Per cent
Index
Emerging Markets PMI (LHS)
BRIICS GDP growth (s.a.a.r.; RHS)
Note: PMI values above 50 indicate expansion.
Source: HSBC; Markit; OECD National Accounts database; and OECD calculations.

6. OECD interim forecasts --
GDP growth in the major economies
6
0
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
China
India
Brazil
Per cent
Per cent
2013
2014
2015
Source: OECD Interim Forecast.
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
United States
Euro area
Japan
Per cent
Per cent
2013
2014
2015

7. GDP growth
Per cent 7
OECD interim forecasts
Note: GDP at market value adjusted for working days. For Germany and India, this measure may differ from national headline measures.
Column1201320142015United States2.22.13.1Euro area-0.40.81.1Japan1.60.91.1Germany 0.21.51.5France0.40.41.0Italy-1.8-0.40.1United Kingdom1.83.12.8Canada2.02.32.7China7.77.47.3India4.75.75.9Brazil2.50.31.4

8. The bullishness of financial markets belies the presence of substantial risks
.
Share prices
Indices, Jan 2005 = 100
Implied share price volatility
Per cent 8
Note: Series shown are the MSCI World and Emerging Markets indices. The MSCI World Index covers 23 developed markets and the MSCI Emerging Markets Index 23 emerging markets.
Source: Datastream.
Source: Datastream.
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
United States:
VIX index
Euro area:
VSTOXX index
0
50
100
150
200
250
0
50
100
150
200
250
Developed markets
Emerging markets

9. In the euro area, projected growth is too weak to reduce economic slack
Output gap Per cent of potential output
.
9
Source: OECD May 2014 Economic Outlook; OECD Interim Forecasts, and OECD calculations.
-4
-3
-2
-1
0
-4
-3
-2
-1
0
2012
2013
2014
2015

10. The OECD does not project euro area deflation, but the risk has risen
Consumer price inflation
Year-on-year, per cent 10
Source: Eurostat.
-4
-3
-2
-1
0
1
2
3
4
5
-4
-3
-2
-1
0
1
2
3
4
5
Euro area
Germany
France
Italy
Spain
Greece

11. Global policy requirements
.
Ease structural constraints to economic growth
Tailor monetary policy to country-specific circumstances, which are diverging
Ensure that public debt burdens are sustainable – for many countries, that means further fiscal consolidation
11

12. The euro area needs more monetary support
.
Recent ECB action is welcome, but further measures, including QE, are warranted
Use all flexibility allowed under the union’s fiscal rules
The completion of the banking union and the effective and credible assessment of banks are both critical
12
Other major central banks have eased more aggressively
Central bank assets as per cent of GDP
0
10
20
30
40
50
60
0
10
20
30
40
50
60
United States
Euro area
Japan
Source: Datastream.

13. Japan’s multi-pronged approach should be maintained
.
Continue monetary expansion to achieve the 2% inflation target
Follow through on second consumption tax hike to advance fiscal consolidation; use short-term measures, particularly further monetary expansion, to cushion negative effects
Legislate and implement announced structural reform
Wages are now picking up
Hourly earnings index, 2010 = 100 13
98
99
100
101
102
103
98
99
100
101
102
103
Source: OECD Main Economic Indicators.

14. US policy stimulus is working
.
Proceed with the intended withdrawal of monetary stimulus
Focus fiscal policy on medium-/ long-term sustainability
Use structural policies to pursue more inclusive growth, and increase public investment
14
Nonfarm payroll growth is around
pre-crisis levels
Thousands, 3-month moving average
-800
-600
-400
-200
0
200
400
-800
-600
-400
-200
0
200
400
Pre-crisis average
(2004-2007)
Source: U.S. Bureau of Labor Statistics.

15. China faces challenges in achieving an orderly slowdown
.
Ensuring an orderly real estate market correction is critical
Easing inflation provides ample room for policy stimulus if needed
Further efforts to make financial regulation more effective are needed
15
Credit growth is being reined in
Year on year, per cent
Note: Non-bank credit includes bankers acceptances, trust loans, entrusted loans and net corporate bond financing.
Source: CEIC.
0
15
30
45
60
75
10
14
18
22
26
30
Total social financing (LHS)
Bank lending (LHS)
Non-bank credit (RHS)

16. India has the opportunity to achieve faster and more inclusive growth
.
Improve fiscal consolidation by shifting from subsidies to investment in social and physical infrastructure
Control inflation and improve financial stability
Improve infrastructure, simplify labour laws and pursue tax reform
Growth has bottomed out
Real GDP, year-on-year percentage change 16
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
Source: OECD National Accounts database.

17. Brazil needs to revive investment
.
Ensure inflation returns to the inflation target.
Increase the primary surplus as the economy recovers.
Pursue reforms that support investment, including tax simplification, accelerated infrastructure spending and lower trade barriers.
Investment is weak
Investment volumes, year-on-year percentage change 17
Source: Instituto Brasileiro de Geografia e Estatística.
-20
-10
0
10
20
30
40
-20
-10
0
10
20
30
40

18. Key messages
The moderate economic expansion is forecast to continue in most major advanced and emerging economies
The euro area stands out as suffering from weak demand and risking prolonged stagnation
Macroeconomic policy needs across countries are diverging
Structural reforms are key to achieving more satisfactory global growth rates
18

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For more information see the Economic Outlook webpage
at http://www.oecd.org/economy/economicoutlook.htm
OECDeconomy
Email: eco.outlook@oecd.org
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