The economies of the U.S., China, U.K., Canada and Brazil are seen slowing

Growth is set to slow across more of the world’s largest economies, including the U.S. and China, according to leading indicators released Wednesday by the Organization for Economic Cooperation and Development.

The Paris-based research body said its gauges of future economic activity—which are based on information available for May—also point to slowdowns in the U.K., Canada and Brazil. The indicators had previously pointed to steady growth for the U.K.

If it materializes, the broadening slowdown suggested by the leading indicators would spell another disappointing year for the global economy, which has struggled to recover from the effects of the 2008 financial crisis.

It would also pose a challenge for central bankers, who have already provided large amounts of stimulus in an effort to keep the recovery on track, and would prefer to return interest rates to more normal rates sooner rather than later. Most policy makers acknowledge that the longer interest rates remain very low, the higher the risk of another crisis in the financial system.

The U.S. economy contracted during the first three months of the year, but most economists attribute that weakness to temporary factors, including harsh weather and a labour dispute at West Coast ports, while the stronger dollar appears to have damped exports.

However, the OECD’s gauge of future activity suggests that following a return to expansion in the second quarter, the U.S. economy is unlikely to grow as rapidly as it did last year. The leading indicator for the U.S. has fallen in each month this year, and now stands at 99.5. A level below 100.0, where it started the year, signals a slowdown, while a level above signals an acceleration.

The world’s second-largest economy is also on course for a continued slowdown, according to the leading indicator for China, which fell to 97.3 in May from 97.5 in April.

The OECD’s leading indicators are designed to provide early signals of turning points between the expansion and slowdown of economic activity, and are based on a wide variety of data series that have a history of anticipating swings in future economic activity.

The leading indicators suggest that while economies that have grown more rapidly than their peers in recent years—such as the U.S. and China—are set to slow, those that have lagged are beginning to pick up, including France and Italy.

“Composite leading indicators…point to growth convergence across most major economies and within the OECD,” the research body said.

Indeed, after having been a drag on global growth in the years since the eruption of its debt crisis in 2010, the eurozone is one of the few potential bright spots, as its leading indicator remained steady at 100.7 for the third straight month, signalling that growth is “firming.” However, the indicator doesn't capture the disruption that would result if Greece were to leave the eurozone, a development that seems increasingly possible.

The leading indicators suggest that Russia’s economy may be close to bottoming out, after a long slowdown deepened by falling oil prices and Western sanctions. The leading indicators pointed to steady growth for Japan, Germany and India.

The OECD’s composite leading indicator for its 34 members fell to 100.0 in May from 100.1 in April.

http://www.wsj.com/articles/oecd-indicators-point-to-growth-slowdown-in-major-economies-1436349601

The predecessor and mentor to Brazil's president says she is running on empty.

The chief opposition party says it is ready to take over and the leader of the lower house of Congress says Brazil should reconsider the role and power of the presidency. This is not the usual jockeying of Brazil's noisy, multiparty democracy.

Rather, the economic and political crisis now engulfing Latin America's biggest economy is prompting politicians, economists and ordinary Brazilians to consider what once seemed unthinkable: that President Dilma Rousseff, re-elected less than nine months ago, might not finish her second term, which runs to 2018.

"It's a real possibility," says Carlos Melo, a political scientist at Insper, a São Paulo business school. "Bad policies and political stagnation have grown into something more urgent." No one expects Rousseff, a 68-year-old former bureaucrat turned energy minister, to step down tomorrow.

She has repeatedly said she will not resign. Impeachment would require proof, none of which exists so far, that she committed crimes or other wrongdoing, particularly with regards to a bribery scandal involving state-run energy company Petroleo Brasileiro SA, or Petrobras.

But the mere notion of political instability illustrates how far Brazil has fallen from its zenith just five years ago. Back then, as Rousseff rode the coattails of her predecessor into office, Brazil was aloft a commodities boom and considered a star among developing nations, posting annual economic growth of 7.5 percent even as the developed world staggered.

Now, Brazil's economy is likely in recession, unemployment is climbing and inflation is galloping at nearly 9 percent, or double the official target rate, eroding purchasing power for the working-class most buoyed by the boom.

Meanwhile, the Petrobras scandal edges uncomfortably close to top aides, a federal auditor may soon reject the government's 2014 bookkeeping and her approval ratings have plummeted to single digits, lower than any president in a quarter century.

On Tuesday, the Eurasia Group, a consultancy, raised the probability of Rousseff leaving office early from 20 percent to 30 percent.

"There is political risk beyond what anyone expected," said Neil Shearing, senior economist at Capital Economics in London. "It's not good for anyone trying to make investments or plans."

Still, even members of her ruling Workers' Party are rebelling. The leftist party opposes her ongoing efforts to impose austerity measures, seen by most economists as essential after a prior term of bloated budgets and interventionist policies. Some party legislators have even voted to increase spending.

Former President Luiz Inácio Lula da Silva, the party's biggest star and a possible candidate in 2018, has increasingly distanced himself from Rousseff, whom he plucked from obscurity and named the party standard bearer when he faced a constitutional term limit. Recently, he compared Rousseff's standing to near-empty reservoirs of drought-plagued São Paulo.

In February, the lower house elected Eduardo Cunha, an Evangelical Congressman, to head the chamber, with twice as many votes as those cast for Rousseff's candidate. Although Cunha's party in theory is allied with Rousseff, he has slowed her legislative agenda and recently said she was so weak that Brazil should switch to a parliamentary system.

Few are as emboldened as the centrist Social Democracy party, which last weekend re-elected as its leader Aécio Neves, the senator Rousseff defeated last October. The administration, Neves told reporters, was headed toward an "an interruption."

http://www.reuters.com/article/2015/07/08/brazil-politics-rousseff-idUSL1N0ZN1SA20150708

China's government plans to spend 250 billion yuan ($40.3 billion) to foster growth in areas of the economy most in need of support, the Chinese cabinet said on Wednesday.

The State Council said after a weekly meeting that authorities will also accelerate construction of big public services projects, such as the building of roads and water conservancy facilities.

The cabinet did not comment on China's plunging stock market, which has slumped nearly one- third since mid-June, after having more than doubled before the sell-off.



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