International Trade & Logistics: OECD Forecasts More Goods in Supply Chain says new report

According to a new report from the Organization for Economic Cooperation and Development, trade flows are ramping up.

Economic activity in OECD countries is picking up faster than expected but volatile sovereign debt markets and overheating in emerging-market economies are presenting increasing risks to the recovery, according to the OECD’s latest Economic Outlook.

Gross domestic product (GDP) across OECD countries is projected to rise by 2.7 percent this year and by 2.8 percent in 2011. These are upward revisions from the previous, November 2009, forecasts of OECD-wide GDP growth of 1.9 percent in 2010 and 2.5 percent in 2011.

In the U.S., activity is projected to rise by 3.2 percent this year and by a further 3.2 percent in 2011. Euro area growth is forecast at 1.2 percent this year and 1.8 percent next while, in Japan, GDP is expected to expand by 3.0 percent in 2010 and by 2.0 percent in 2011.

Trade flows are rising again. Strong growth in China and other emerging markets is helping to pull other countries out of recession. But at the same time, the risk of overheating and inflation is growing in emerging markets. A boom-bust scenario cannot be ruled out, requiring a further tightening in countries such as China and India.

“The knock-on effect would be slower growth in other regions,” spokesmen said.  “Exchange rate flexibility could ease some of the pressure on Chinese monetary policy and provide more scope for addressing domestic inflation.”

Instability in sovereign debt markets poses another serious risk. It has highlighted the need for the euro area to strengthen its institutional and operational architecture. Bolder measures need to be taken to ensure fiscal discipline, said the OECD report.