Growth continued at a moderate pace in the second quarter, as gross domestic product (GDP) increased by 0.7% on a quarter-to-quarter basis. This continued a trend of the last five quarters, and was close to the average quarterly growth rate over the last nine years.
The overall figure hides the rather mixed performances. GDP in the euro area rose by 0.3%, showing no change from the weak growth recorded in the previous three quarters. In the US quarterly GDP grew by 0.8% in the second quarter of 2005, down 0.1 percentage points on the previous quarter. Japan saw a rise of 0.3% compared to the 1.3% growth recorded in the first quarter of 2005.
Meanwhile, the OECD’s interim forecasts issued on 6 September as an update to the Economic Outlook of June 2005 showed downward revisions for GDP forecasts for Germany (1% instead of 1.2%) and the UK (1.9% instead of 2.4%), but upward revisions in France (1.4% to 1.6%), Italy (-0.6% to 0.2%) and Japan (1.5% to 1.8%). The forecast for the US was held steady, at 3.6% in 2005. The next OECD Economic Outlook will be published in November.
The OECD leading indicators for the month of August show weakening performance in the US and Canada, but improvement in the euro area and Japan. The OECD Composite Leading Indicators (CLI) incorporate a wide range of indicators such as building permits, order flows, long-term interest rates and sentiment surveys in a bid to deliver early signals of peaks and troughs in economic activity. Overall the OECD leading indicator rose by 0.1 of a point from 103.9 in July to 104.0 in August.
Mixed signals: Composite leading indicators, annualised 6-month rate of change:
Early signals of the CLI for turning points (P: peak, T: trough) in the reference series, e.g. a peak for August 2000 was predicted by the CLI, 8 months in advance (i.e. -8)
Inflation rose a little as the OECD consumer price index (CPI) climbed 2.8% in the 12 months to August 2005, up from 2.2% year-on-year in June. This rise was due mainly to an increase in energy prices (13.6% in August compared with 10.9% in July). Excluding food and energy, consumer prices for the OECD remained stable at 1.8% year-on-year in August compared with 2% in January. On a monthly basis inflation in the OECD was 0.3% in August, up from 0.2% in July.
In the euro area, the consumer price index rose by 2.2% in August, while month-on-month the figure rose by 0.3% after a 0.2% fall in July. Prices rose in the US by an annual 3.6% in August, while Japan experienced a decrease of 0.3%, although this was inferior to the 0.5% fall in June. Over the 12 months to August, CPI in the rest of the G7 countries rose, by 2.8% in the UK, by 2.6% in Canada, 2% in Italy, 1.9% in Germany, and 1.8% in France. Taking food and energy out of the equation, year-on-year consumer prices remained unchanged at 1.3% in August relative to July 2005, yet down from 1.5% in June of this year.
As part of the OECD Initiative on Governance and Investment for Development, officials from MENA and OECD countries, international organisations and the private sector will meet in Istanbul in October to discuss how best to respond to this challenge. Investment is crucial to providing new engines of growth and employment throughout the Middle East and North Africa (MENA), the organisers believe, and these countries can do more to attract foreign investment.
A number of MENA countries have prepared national investment reform agendas to be reviewed at this meeting, and recommendations in such areas as open and transparent investment policies, tax frameworks and corporate governance will be discussed. The event will pave the way for a ministerial meeting in Amman on 17 November 2005, at which MENA countries will finalise a declaration on attracting investment. For more information about the MENA-OECD Investment Programme and a list of participating countries, please consult the MENA website: www.oecd.org/mena/investment.
Senior government officials meeting in Paris agreed to a pause in their work on finding an agreement to tackle market-distorting measures in the shipbuilding industry. The decision was made at a high level meeting attended by officials from 26 OECD and non-OECD economies called to deal with a number of key issues requiring serious negotiation, such as differential treatment for developing and emerging economies, and pricing. Following frank and open discussions, the chairman, Wilhelm Jaggi, Swiss ambassador to the OECD, concluded that there was insufficient common ground for the successful conclusion of an agreement, in particular on pricing. The pause will provide participants with an opportunity to explore the scope for advancing the talks and to rally the industry support needed for success, a statement issued after the meeting said.
The unemployment rate for the OECD area stood at 6.5% in August 2005, 0.4 percentage point lower than a year earlier. In the euro area, the standardised unemployment rate rose to 8.6% in August 2005, 0.1 percentage point higher than the previous month but 0.3 percentage point lower than a year earlier. The US standardised unemployment rate for August 2005 fell to 4.9%, 0.1 percentage point lower than the previous month and 0.5 percentage point lower than a year earlier. For Japan, the rate was 4.3% in August 2005, 0.1 percentage point lower than the previous month, and half a point lower than in August 2004.
The OECD’s StatLink service has been given a “Highly Commended” award for Publishing Innovation by the Association of Learned and Professional Society Publishers (ALPSP). StatLinks are internet URL addresses that appear at the bottom of many charts and graphs in OECD publications. See Databank (page 52) for examples. These link to background spreadsheets containing the underlying data. ALPSP described StatLink as “a delightfully simple and easy to use innovation”.
Readers can “click” on any table/chart/graph and download the underlying spreadsheet. Better still, they can download these spreadsheets even if they only have access to the printed version of an OECD publication, by transcribing into their browser the DOI (Digital Object Identifier). The judges felt that this was a simple, well-executed idea that enhanced the value of OECD publications. Toby Green, OECD’s Head of Dissemination and Marketing, was delighted with the award. “It vindicates the good feedback we have been getting from our readers about StatLink”, he said.
For more on Statlink, see www.oecd.org/statistics/statlink.
“Complete freedom in price formation will not always have the desired effects on supply…if prices alone are used to maintain incomes per head, agricultural output may be guided in the wrong directions.” From Low incomes in Agriculture, report approved by OECD agriculture ministers in 1965, quoted in OECD Observer No. 17, August 1965, p7.
©OECD Observer No 251, September 2005