The survey by the Paris-based group of 34 countries, including nearly all the major industrialised countries  (excluding China, Brazil and India), looks at composite leading indicators (CLIs) for September, which predicts economic trends some six months in advance. It shows economic activity slowing in North America, Europe, major parts of South America and most of Asia, including China.

The OECD report is the latest in a series of economic analyses and forecasts indicating that the stop-start-recovery from the 2008/2009 financial crash and recession has run its course and is giving way to a new and even deeper global economic slump.

The International Monetary Fund also last week warned that China’s financial system is at risk from bad loans, booming private lending and sharp falls in property prices. It blamed heavy government involvement in the country’s banks and watchdogs for reducing market discipline and corporate governance.

The organisation said that rampant lending since the 2008 financial crisis has left many companies and local governments in China with huge debts. The recent slowdown in economic growth and failing property prices have fuelled fears of an explosion in defaults.

Continued slowdown

The OECD said the CLI-index for its member countries—including the US, Canada, Mexico, Chile, Germany, Britain, France, Italy, Greece, Spain, the Netherlands, Turkey, Israel, Japan, South Korea, Australia and New Zealand—fell to 100.4 in September from 100.9 in August. It was the seventh straight monthly decline. The measure for major developing countries outside the organization also pointed to a further slowdown.

“Compared to the last month’s assessment,” the OECD said, “the CLIs point more strongly to slowdowns in all major economies.”

The leading indicators for the US, Russia and Japan fell from August but remained above the long-term economic trend for each country, which the OECD designates as the 100 level, regardless of the actual rate of growth. These three countries, according to the report, face “slowdowns in growth towards long-term trends.”

The CLIs for Canada, France, Italy, Britain, Brazil, China, India and the euro zone all fell below the 100 level. The measure for Germany plunged from 100.4 to 99.1. Of this second group, the OECD said the indicators “point to economic activity falling below long-term trend”.

In a further sign of decelerating growth, the OECD reported that the rate of new business start-ups has fallen this year after rising in 2010.

The OECD predicted last month that the Group of Seven largest economies would grow by just 0.2% in the final three months of 2011, and the German economy would contract by 1.4%.

The bleak outlook was reinforced by another report released Monday showing a sharp fall in euro zone factory output in September. Eurostat, the European Union’s statistical office, said industrial production in the 17 nations that share the common European currency decreased by a much larger than expected 2% compared with August – the biggest monthly fall since September 2009.

Production fell particularly sharply in Italy (-4.8%) and Portugal (-5.8%). Industrial production in the euro zone remains substantially below its peak in 2008.

Also last week, the European Commission issued a report warning that Europe’s gross domestic product was “now projected to stagnate until well into 2012.” Economic Affairs Commissioner Olli Rehn told a press conference, “Growth has stalled in Europe and there is a risk of a new recession.” Rehn said several European Union countries would see their economies contract.

South Africa

In the meantime the International Monetary Fund said on Wednesday last week it had cut its economic growth projections for South Africa to 3% for this and next year due to the sluggish global economy. In October the IMF’s growth prediction for the country was still 3.5% for this year.

“Growth has slowed down very dramatically and we’ve revised our numbers, reflecting both domestic trends and global trends. We’ve revised growth to 3% this year and next at this juncture, IMF representative Abebe Selassoe told members of parliament.

Europe remains South Africa’s biggest trading partner and the governor of the Reserve Bank, Gill Marcus, also warned last week that a meltdown in that region would have severe implications for the country.

She warned that the bank’s latest forecasts for SA’s economy were not based on the assumption of a worst-case scenario for Europe's sovereign debt crisis, implying that a further cut in interest rates in the coming months cannot be ruled out completely.

At its monetary policy committee (MPC) meeting the previous week, the Reserve Bank  also revised its economic growth forecast for SA this year down to 3%, from 3,2% previously. Its estimate for next year was lowered to 3,2%, from 3,6%.

"Although our assumption for European growth has been lowered, it does not contain the worst-case scenario of a meltdown in the euro zone, which would have severe implications for the global economy and SA," Marcus said.

"Although this is seen as a tail risk, it is not a remote possibility ... the MPC is prepared to take appropriate action should the need arise."