OECD Report: China, Brazil Stabilizing Economically

January 13, 2016Economic Conditionsby EW News Desk Team

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For months, economists have worried about the state of the Chinese economy. As the world's second largest economy, a slowdown of the Chinese economy could drag down the economy of the entire world. Fortunately, China's economic slowdown may end later this year according to a report released Monday by the Organization for Economic Cooperation and Development (OECD).

The Paris-based research body of the OECD said in its report, which it based on data that ran only through November 2015, which indicators are solid for gradual economic improvement and stabilization in China and Brazil for 2016. However, it continued to forecast slowing growth for nations like the United States, the United Kingdom, and Russia. It predicted an uptick in growth for Canada and Japan, and full-blown economic acceleration in India. 

The positive indicators for China are good news for both the Asian nation and the world as a whole. As China's economy stabilizes and begins to expand once more, it should provide a much-needed boost to the global economy, as well. Many economists feared China would continue to slump in 2016, even predicting a so-called "hard landing." If the indicators prove true, then this could serve as a huge point of relief for investors and businesses around the world.

In the third quarter of 2015, China's economy grew by 6.9 percent. While that may seem quite healthy compared to the much smaller amount of growth experienced regularly in the United States, it is actually the slowest pace of growth for the Chinese economy since the global financial crisis. Fortunately, the OECD's leading indicator for the Chinese Economy rose to 98.4 in November (up from 98.3 in October). This was the second straight month of increase, which has given the OECD reason to call the trend "tentative signs of stabilization."

The OECD's leading indicators provide early signs of an economy's performance, including transitions from times of expansion to slowdown. The indicators derive from a variety of data points, and interpret against a history of past performance. Based on the data, the OECD believes the Chinese economy should stabilize before the midway point of 2016.

Brazil, too, showed similarly strong indicators for growth and stabilization in 2016. While significantly less influential than the Chinese economy, Brazil's economy is still one of the largest in South America. Taken together, the improving performance of these two nations may demonstrate that the global economy will improve significantly in the early part of 2016. Though most nations will see only modest gains, the OECD predicts that India and France will experience significant economic acceleration over the first half of the year.

Still, according to The Denver Post, the overall indicators for all of the OECD's member nations, taken as a whole, remained unchanged at 99.8. Unfortunately, anything under 100 indicates slower than normal anticipated growth, meaning the global economy is not out of the woods yet.