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UK seeing a downturn in growth, says OECD

LONDON (SHARECAST) – The UK is currently experiencing a downturn in growth, according a report by the Organisation for Economic Co-operation and Development (OECD).

The statistical think-tank measures the composite leading indicators (CLIs) designed to provide early signals of fluctuations in economic growth around its long-term average score of 100 (based on industrial production).

Despite the UK rising 1.5 points compared with 2009, the score of 102.4 for September is down 0.1 from 102.5 in August. In May, the figure stood at 103.3.

The month-on-month decline represents a moderate downturn as the factors determining the CLIs take into account movements in GDP, the economy and sensitivity to expectations of future activity.

Despite seeing a downturn, figures above 100 suggest we are not experiencing another recession.

According to a statement by PricewaterhouseCoopers on Tuesday, the UK should see a moderate growth of two percent in 2011, albeit a slightly slower rate of growth than desired, due to the VAT rise and the effects of government cuts that will kick in early next year, the accountancy firm said.

Along with the UK, a moderate downturn was also seen in the month-on-month declines of Canada, France, India and Italy.

Stable monthly figures or increases were signs of a continuing expansion, seen in Germany, Japan, the US and Russia.

However, “the CLIs for Brazil and China continue to point strongly downwards, edging below the long-term trend and implying that the level of industrial production will fall below its longer-term trend in these two economies,” the OECD said.

Results for Brazil and China saw the CLIs fall below 100 to 98.6 and 99.3, respectively, signalling a slowdown in economic activity.

The OECD area, comprising of 29 countries, has seen its average score of 102.8 remain stable for the last four months, signalling a steady expansion.

Average CLIs of the “major” G7 nations point to a “steady expansion” in September, but the results show “diverging patterns of economic growth across major economies”, with figures for the US and Japan showing growth, while the UK and France sees restricted expansion.

 

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