Disconnect between stock market and economy, OECD warns

Disconnect between stock market and economy, OECD warns

Disconnect between stock market and economy, OECD warns

The Organisation for Economic Co-operation and Development (OECD) lifted its growth projections for the USA economy to 2.4% this year and bumped its estimate for Canadian growth to 2.4%.

"Disconnects, volatility, financial vulnerabilities and policy uncertainty could derail the projected modest pick-up in growth", the organization said.

The Economic Outlook report projected the US economy to grow by one percentage point to 2.4 percent this year on strong domestic demand.

In its Interim Economic Outlook report, the Paris-based think tank projected global growth of 3.3 percent for this year and 3.6 percent for next year.

In November, faced with the acceleration of the United Kingdom economy on the back of continued strength in consumer spending, the OECD changed its prediction to 1.2 per cent.

The projected improvement largely reflects continuing and expected combined fiscal and structural initiatives in the major economies - notably China, Canada and the United States - together with a slightly more expansionary stance in the euro area, which could be more ambitious.

The think-tank said Canada's economy will be supported this year by export growth, a better market for commodities and government spending initiatives.

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"Financial market expectations imply that a large divergence in short-term interest rates between the major advanced economies will open up in the coming years". Now, more than ever, governments need to take actions that restore people's confidence while at the same time resisting turning inwards or rolling back numerous advances that have been achieved through greater global co-operation'.

Among the specific country outlooks highlighted by the OECD were the USA, where domestic demand is set to strengthen, supported by gains in household wealth and an upturn in oil production.

As rising inflation hits British consumers and businesses put investment on hold over Brexit, British growth was seen slowing from 1.6 per cent this year to 1.0 per cent in 2018.

Next year, the USA economy is projected to grow by 2.8 per cent and Canada's is expected to expand by 2.2 per cent, ahead of the other G7 countries.

In Japan, fiscal easing was seen underpinning growth of 1.2 per cent though the rate was seen falling back to 0.8 per cent in 2018. Its estimate for China GDP was increased modestly to 6.5% for this year and 6.3% for 2018.

In China, growth is projected to slop to 6.5% this year and down again to 6.3% next year as the Chinese economy transitions from external demand and heavy industry towards domestic consumption and services. China's growth is projected to slip - to 6.5% in 2017 and 6.3% in 2018, down from 6.7% a year ago.

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