Historically high inflation, low consumer confidence and declining share values point to a deteriorating outlook in most big economies, the Organisation for Economic Co-operation and Development (OECD) has warned.
The agency said composite leading indicators (CLIs), which are driven by high-frequency data such as order books, confidence indicators, building permits, long-term interest rates and new car registrations, point to a loss of growth momentum in most large OECD economies.
This is the case for the euro zone as a whole including France, Germany and Italy, as well as Canada, the UK and the United States, it said.
“Persisting uncertainties related to the war in Ukraine, renewed Covid-19 threats, supply chain disruptions and the impact of high inflation on real household income are resulting in larger-than-usual fluctuations in the CLI components,” it said.
“As a result, the indicators should be interpreted with care and their magnitude should be regarded as an indication of the strength of the signal rather than as a measure of growth in economic activity.”
The euro-zone economy grew much faster than expected in the second quarter, but economists are still predicting that higher inflation and supply chain problems trigger a mild recession in the second half of the year.
The Bank of England, meanwhile, warned last week that the UK is now facing into the most protracted recession of any industrialised country — starting in the final quarter of this year and lasting for the whole of 2023 — and the worst cost-of-living squeeze in more than 60 years.
The Economic and Social Research Institute expects the Irish economy to continue to perform strongly and grow at a rate of 6.8 per cent in gross domestic product (GDP) terms this year on the back of strong exports from the multinational sector.
Separate figures from the Central Statistics Office on Tuesday indicated that manufacturing output rose by 4.2 per cent in the second quarter compared with the previous three-month period but fell by nearly 5 per cent on an annual basis. Production in the “traditional sector” was 14.6 per cent greater than in the corresponding period of 2021, when many industries were affected by Covid-19-related restrictions. Over the same period, production in the “modern sector” declined by 7.1 per cent.
The modern sector comprises the chemical, pharmaceutical, computer, electronic, medical, and dental sectors, while the traditional sector is made up of the remaining industrial enterprises.