The global economy — including Canada — is on track to slow in the coming months, according to a report from the Organization for Economic Co-Operation and Development.
The OECD said Monday its monthly index for composite leading indicators pointed “more strongly to slowdowns in all major economies” with Canada among those set to see growth drop below the long term trend.
The Canadian economy has weathered the recession and its aftermath better than those in many other countries, but is still feeling the drag of a painfully slow global recovery.
Canada dropped 0.4 points in September, taking its composite leading index number to 99.4, down from 101.2 in May. The country’s leading indicator has been falling for several months and dropped below 100 in August.
For the OECD member countries as a whole, September’s reading was 100.4 down 0.4 percentage points from August and down from 102.3 in May.
Severe debt problems in Europe combined with slow growth in the United States, Canada’s biggest trading partner, will likely reduce demand for the natural resources that Canadian companies produce.
Last week, Bank of Canada governor Mark Carney warned that the global economy was confronted by a new wave of credit tightening as a result of the European debt crisis that will subdue growth in many countries,
With private lending drying up over concerns about sovereign debt in Europe, Carney said it is again up to the public sector, in particularly central banks, to ensure there is sufficient credit available at reasonable terms for businesses and households to continue to invest and spend.
The Bank of Canada projected last month the domestic economy would slow to 0.8 per cent growth in the last three months of this year, half of the expected rate of the third quarter.
The forecast predicts that the economy will advance 2.1 per cent this year, soften to 1.9 per cent in 2012 and pick up speed to 2.9 per cent in 2013.
The OECD uses the index to foresee changes in the economic trend in six to nine months but cautions it’s a broad measure that’s not intended to judge the speed or strength of a recovery or downturn.
In addition to Canada, France, Germany, Italy, the United Kingdom, Brazil, China, India and the euro area are expected to fall below long-term trend.
The indicators point to growth in the United States, Japan and Russia slowing to their long-term trends.
The United States had a reading of 101.2 in September, down 0.3 points from August and down from 101.7 in May while China’s dropped to 99.8 in September, down one point from August and down from 100.6 in May.