Report: Global economic outlook dims

Further signs of economic slowdown have emerged with news of waning Chinese and US demand for oil, and a report that the outlook has taken a turn for the worse across the big industrialised countries.

Oil demand fell short of expectations in the first quarter of 2005

The International Energy Agency (IEA) said on Wednesday oil demand from China, Europe and the United States had fallen short of expectations in the first quarter of 2005, and the IEA’s chief oil expert said this probably was due as much to slackening growth as prices were still topping $50 a barrel.

Chinese demand, an explosive 19.3% in the first three months of 2004, slowed to 4.5% in the same period this year, while US and European demand grew less strongly, with Germans reluctant to fill home heating tanks at current prices.

The Organisation for Economic Cooperation and Development (OECD) said its monthly indicator of economic prospects fell in March in all of the Group of Seven powers – the United States, France, Germany, Italy, Britain, Canada and Japan.

“Slowing activity lies ahead in the OECD area, according to the latest composite leading indicators,” said the organisation, whose 30 countries account for about 80% of world output. 

Investors trying to gauge how significant the slowdown is will get more to chew on Thursday with the release of the first quarter growth data for the euro zone, after data indicating that US and British expansion slowed in the opening months of 2005.

Confidence surveys and surveys of manufacturing activity in Europe took a turn for the worse as the second quarter of 2005 began, meaning that even a positive surprise in Thursday’s data would not be expected to change overall perceptions.
The European Commission is to issue forecasts for the second and third quarter growth on Thursday and recently cut its forecast for the year to 1.6% from 2%, which was the pace of growth in 2004 and about half of US levels.

Source: Reuters