OECD Cautions That “The Financial Market Response To Any Increase In Rates May Not Be Smooth”


The Organization for Economic Co-operation and Development, in its latest economic outlook released Tuesday, is warning that “the positive assessment reflected in market valuations appears disconnected from real economy prospects,” going on to caution: “the financial market response to the increase in rates … may not be smooth.” 

BNN.ca

According to OECD estimates, Canada’s economy is projected to grow this year by 2.4%, (vs. 1.4% in 2016) equaling what’s now expected in the United States and ahead of the other Group of Seven countries (Germany being the next highest at 1.8% GDP growth) its world economic estimate is 3.3% — just slightly better than last year’s weak 3.0%. “Confidence has improved, but consumption, investment, trade and productivity are far from strong, with growth slow by past norms and higher inequality,” the OECD said.

Next year, the U.S. economy is projected to grow by 2.8% and Canada’s is expected to expand by 2.2%, ahead of the other G7 countries. Global economic growth for 2018 is forecast to be 3.6%…

The think-tank said Canada’s economy will be supported this year by export growth, a better market for commodities and government spending initiatives. However, it again raised a red flag about the rapid increase in house prices in Canada and other countries including Australia, Sweden and the United Kingdom. “As past experience has shown, a rapid rise of house prices can be a precursor of an economic downturn,” it said…

The modest pick-up in global growth in 2017-18 reflects the effect of ongoing and projected fiscal initiatives, notably in China and the United States, and initiatives in other economies such as Canada, the report says. “These are expected to catalyse private economic activity and push up global demand. Exiting the low-growth trap depends on the joint impact of macroeconomic, structural and trade policy choices, as well as on concerted and effective implementation of existing initiatives.”

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