OECD predicts growth areas -- Include in your portfolio

August 9, 2006

On August 4, the Organization for Economic Cooperation and Development (OECD) predicted which countries will continue to grow over the next six months. The Composite Leading Indicator (CLI) report showed that China, India and Russia will continue to show strong growth, while the U.S., Japan, and Brazil will continue to slow. The U.K. and the Euro area had mixed indicators, which portend moderate growth.

The OECD is an association of 30 nations in Europe, North America, and the Pacific that works to promote the economic welfare of its members, and coordinates their efforts to aid developing countries.

What It Means:
These trends reflect the global economy’s reaction to tightening credit and rising inflation. China, India and Russia have seen higher growth rates than the developed countries, but they too will slow as their exports to the rest of the world start to decline. The predicitive ability of the OECD report means that these countries will still show strong growth for at least the next six months.

Action Steps:
A slower global economy means lower returns on your portfolio. However, the emerging markets still have some life left in them, and are doing better than the developed markets, so make sure you maintain some as part of your asset allocation.

Source: “OECD Composite Leading Indicators report,” August 4, 2006, OECD web site