The economies of Europe continue to lose momentum, while growth in the OECD area as a whole remains stable, according to trends shown by composite leading indicators (CLIs).
CLIs aim to anticipate cyclical fluctuations in economic activity over the next six to nine months based on a range of forward-looking factors such as order books, confidence indicators, building permits, long-term interest rates or new car registrations.
The latest CLIs include metrics for April 2022.
Inflation impacts indicators
In France, Germany, Italy and the UK, surging inflation and declining expectations in manufacturing weighed on the economic barometers, the OECD reported.
Inflation is, however, not confined to Europe.
Consumer prices in the OECD area rose by 8.8% year-on-year in March 2022, compared with 7.8% in February 2022, and just 2.4% in March 2021. It was their sharpest increase since October 1988.
Around one-fifth of OECD countries recorded double-digit inflation, with the highest rate in Turkey at 61.1%.
Energy price inflation in the OECD soared to 33.7% year-on-year in March, up from 26.6% in February, its highest rate since May 1980. Excluding food and energy, year-on-year inflation increased to 5.9% in March, after 5.6% in February 2022.
Outside of Europe, growth rates appeared to remain stable in Canada, Japan, the US and major emerging market economies such as China and India.
In Brazil, in contrast, the indicators point to slowing growth.
Household income declines
Household incomes in the OECD area fell slightly in the fourth quarter of last year, despite higher economic growth rates.
While GDP per capita rose by 1.2% quarter-on-quarter in the fourth quarter of 2021, real household income per capita dropped by 0.3%.
Real household income per capita has stagnated during the past six months and trailed growth in GDP per capita for the third consecutive quarter, the OECD said.
“While the trend in GDP per capita reflects the recovery in economic activity after sharp declines in the early stages of the pandemic, the trend in household income per capita reflects, among other things, reductions in pandemic-related government assistance paid to households since early 2021,” the organisation said.
Nevertheless, household income was 3.8% higher in the fourth quarter of 2021 than it was in the fourth quarter of 2019, before the start of the pandemic.
Employment rate reaches pre-pandemic levels
The OECD employment rate, meanwhile, increased to 68.7% in the fourth quarter of 2021, just 0.2% below the rate recorded in the fourth quarter of 2019.
Increases in the employment rate were reported in four-fifths of OECD countries.
The OECD countries’ labour participation rate of 72.8% is also just below the record set in the last quarter before the pandemic.
In the US, however, the employment rate of 70.5% is still 1.2 percentage points below the pre-pandemic rate.
In March, the unemployment rate in the OECD fell to 5.1% from 5.2% in February. It was the eleventh consecutive month of falling or stable unemployment rate, keeping it below the pre-pandemic rate of 5.3% recorded in February 2020.
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