The latest update to the economic forecast issued by the Organisation for Economic Co-operation and Development (OECD) confirms what the equity markets have been telling us: economic conditions across the globe are bad, but not as bad as everyone believed they would be just a few months ago.
Here is what the OECD had to say about the U.S. and “BRIC” countries:
US economic activity this year is expected to fall 2.8%, against the 4.0% decline projected in March. Growth in 2010 is now forecast at 0.9% compared with 0% previously. The trough in US activity is expected during the second half of this year but the Outlook warns that as the impact of the stimulus measures fades, increased savings by corporations and consumers to reduce their indebtedness will continue to hold back growth. The recovery will not be strong enough to stop unemployment rising to around 10% over the next two years.
A recovery already appears to be taking hold in China, helped by major stimulus measures. Chinese GDP growth is forecast to be 7.7% in 2009 and 9.3% in 2010, an upward revision from the OECD’s March forecasts of 6.3% this year and 8.5% next year. In Brazil, economic activity is forecast to fall by 0.8% in 2009 and rebound to 4.0% growth in 2010 (March forecast -0.3% and +3.8%); in Russia, economic activity is forecast to drop by 6.8% in 2009 and climb by 3.7% in 2010 (March forecast -5.6% and +0.7%); and in India, growth is predicted to slow to 5.9% in 2009 before accelerating to 7.2% in 2010 (March forecast 4.3% and 5.8%).
Deleveraging will put a damper on U.S. economic growth in 2010, and probably beyond, while the BRIC countries will enjoy the best of the worldwide recovery. What does this mean for investing? Investors who want to stay close to home in the U.S. need to look at companies that have strong international sales components. For example, if Brazil is selling a lot of what it has in the ground, look for the U.S. company that manufactures and sells to Brazil the equipment necessary to extract minerals. Also, staying with Brazil for a moment. If Brazil begins drilling for oil in the deep waters off its coast, look for the U.S. company that will provide pipelines and storage facilities. [Two possible answers: Joy Global (JOYG) and Flowserve (FLS).]
In any event, diversifying one’s portfolio by investing in the BRIC countries will be an imperative for the next couple of years.
Click here to review the full Economic Outlook from the OECD.
OECD Upgrades Its Economic Outlook
Posted by Gregg Killoren on June 24, 2009
The latest update to the economic forecast issued by the Organisation for Economic Co-operation and Development (OECD) confirms what the equity markets have been telling us: economic conditions across the globe are bad, but not as bad as everyone believed they would be just a few months ago.
Here is what the OECD had to say about the U.S. and “BRIC” countries:
Deleveraging will put a damper on U.S. economic growth in 2010, and probably beyond, while the BRIC countries will enjoy the best of the worldwide recovery. What does this mean for investing? Investors who want to stay close to home in the U.S. need to look at companies that have strong international sales components. For example, if Brazil is selling a lot of what it has in the ground, look for the U.S. company that manufactures and sells to Brazil the equipment necessary to extract minerals. Also, staying with Brazil for a moment. If Brazil begins drilling for oil in the deep waters off its coast, look for the U.S. company that will provide pipelines and storage facilities. [Two possible answers: Joy Global (JOYG) and Flowserve (FLS).]
In any event, diversifying one’s portfolio by investing in the BRIC countries will be an imperative for the next couple of years.
Click here to review the full Economic Outlook from the OECD.
This entry was posted on June 24, 2009 at 6:41 am and is filed under China, Economy, Investing. Tagged: Economy, Market Commentary, GDP, BRIC Countries. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.