US manufacturing seems to be growing, but not particularly strongly, and that is the refrain throughout the nation. Durable goods rose more than forecast in June which should help manufacturing and the economy in general in the second half of the year. Bookings for goods meant to last at least three years increased 4.2 percent, led by transportation equipment, after a revised 5.2 percent gain in May that was bigger than initially reported by the Commerce Department. Unfilled orders for big-ticket goods rose the most since December 2007.
Gains in residential real estate and motor vehicle sales are helping make up for weakness in overseas markets and benefiting automobile companies and white goods manufacturers. A pickup in business investment amid lean inventories would provide a boost to manufacturing after a first-half slowdown. Optimism about future economic growth increased. Nearly three-quarters of the survey respondents forecast growth of 2.1 percent or more over the next 12 months. That’s up from two-thirds in the first quarter survey, released in April, and the most in a year. Growth has been slow in the last nine months, but employers have been adding jobs at a healthy pace. This will help accelerate growth in the second half of this year.
China’s economy relies heavily on investment and not consumption, but that model won’t work for much longer. “Investment is now running into sharply diminishing returns and is going to drop drastically no matter what the government does; consumer spending must rise dramatically to take its place. The Chinese government has delayed accepting this major change, but they cannot ignore it any longer.
The Organization for Economic Co-operation and Development (OECD), a club of 34 mostly rich countries, is making a potentially important moment in the fight against vigorous tax avoidance. There is, however, a long way to go before the plan can live up to its billing by Ángel Gurria, the OECD’s secretary-general, as “a turning-point in the history of international tax co-operation”. As public ire has grown over tax-planning ruses that allow many multinationals to pay rates of income tax far below the statutory level, pressure has mounted on policymakers to move beyond their “pay your fair share” rhetoric. The Group of 20 countries (the world’s most advanced economies plus some large emerging markets) asked the OECD to draw up proposals for reforming the current patchwork of rules and tax treaties, which big business can easily game. The result, unveiled on July 19th, was promptly endorsed by the G20’s finance ministers.
Things may change: as the eventual adoption of the earlier multilateral convention shows, international tax reform is not impossible, merely painfully slow.