OECD GDP growth. The OECD published an interesting chart a couple of week ago showing the breakdown of growth within the OECD area in the 3rd quarter of last year. Given all the doom and gloom about the outlook, these figures are actually quite encouraging. They show overall growth of 0.6% in the quarter (annualised 2.4%) with positive contributions from consumption,investment and net trade with the only detractor being a decline in inventories. This was after growth of 0.5% in all of the first half. So why the doom and gloom? The best explanation would seem to be the threat of deflation. Whilst real GDP growth looks just about acceptable, nominal growth does not and for this we have to thank Japan and Europe. Japan is struggling to scape deflation despite an aggressive monetary expansion but Europe still looks as if it is slowly but surely sinking into deflation. In the short run, the picture is reasonably encouraging. The Federal Reserve is moderately positive about the outlook for the American economy and the UK economy should do sufficiently well to boost the current government in advance of the election. The outlook for Asia is also positive helped by the fall in the oil price which should make life easier for Japan. Even Europe is showing signs of recovery as indicated by the German IFO survey and other monthly data. The longer term problem for Europe is that nominal GDP growth is unlikely to be sufficient for the periphery countries to escape the debt trap, which is a perfectly rational explanation for the collapse in their bond yields. They are all politically committed to remain within the euro area despite continuing deflation and very low economic growth. But in the meantime, the positive trend of the 3rd quarter of 2014 will extend into this year. THe fall in the oil price will boost real incomes throughout the OECD and must lead to stronger consumption. Whether that boost will be sufficient to persuade some central banks to raise rates towards the end of the year will be one of the imponderables of the second half of 2015.