Global growth slowing faster than expected - OECD

09 September 2010 14:05  [Source: ICIS news]

LONDON (ICIS)--Global economic growth may be slowing at a faster pace than previously anticipated, the Organisation for Economic Co-operation and Development (OECD) said on Thursday.

Growth in the Group of Seven countries (Canada, France, Germany, Italy, Japan, the UK and the US) was expected to be around 1.5% in the second half of the year compared with the same year-ago period, according to the OECD’s latest interim economic assessment.

This was down from its previous estimate at 1.75%.

The OECD said the loss of momentum in the recovery was temporary although uncertainty had increased.

“The uncertainty is caused by a combination of both positive and negative factors,” said OECD chief economist Pier Carlo Padoan. “But it is unlikely that we are heading into another downturn.”

The combined GDP of the three largest countries in the euro area (France, Germany and Italy) was projected to grow at 0.4% in the third quarter, rising to 0.6% in the fourth quarter.

US GDP was expected to rise by 2.0% in the third quarter but then moderate to 1.2% in the fourth quarter of 2010. In Japan, GDP growth was forecast at 0.7% in the fourth quarter after 0.6% in the third.

The OECD said that while consumer spending was set to remain weak, a combination of robust corporate profits and low business investment suggested that capital spending was unlikely to weaken further.

“Because inventories are now close to desired levels, a renewed depletion of stocks is also unlikely,” it said.

Padoan said that if the slowdown in the recovery were to become entrenched, and the risk of downturn increases, additional monetary stimulus in the form of quantitative easing and keeping interest rates close to zero for a longer period could be necessary.

The Bank of England kept UK interest rates at a record low level of 0.5% on Thursday for the 18th consecutive month in an effort to help the economy grow amid signs of a weakening recovery.

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By: Hilde Ovrebekk
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