By Nick Mann | 30 March 2012
The first half of 2012 will see ‘robust’ growth in the United States and Canada but much weaker activity in Europe, the Organisation for Economic Co-operation and Development said yesterday.
Assessing the economic outlook for OECD countries, it said the Group of Seven would achieve overall growth of 1.9% in both the first and second quarters of 2012.
But there would be a ‘strong variance’ in outlook between the individual countries. In the US, the increases in employment and consumer confidence, as well as higher equity prices and credit growth, contributed to a growth forecast of 2.9% for the first quarter of 2012, and 2.8% in the second.
Similarly, the Canadian economy is projected to grow by 2.5% during each of the first two quarters.
In contrast, the combined economies of the three largest European countries – Germany, France and Italy – would fall into recession in the first three months of 2012, with –0.4% growth following –0.8% growth in the final three months of 2011. A similar situation was envisaged for the UK, with the economy shrinking by –0.4% in quarter one after it shrank by –1.2% in the fourth quarter of 2011.
Recent ‘positive indicators’ did, however, suggest German growth might increase to 1.5% in the second quarter of 2012.
Both the UK and France should also return to growth, with 0.5% and 0.9% increases forecast for them respectively between April and June.
OECD chief economist Pier Carolo Padoan said: ‘Our forecast for the first half of 2012 points to robust growth in the United States and Canada, but much weaker activity in Europe, where the outlook remains fragile. We may have stepped back from the edge of the cliff, but there’s still no room for complacency.’
A number of factors threaten the recovery, the OECD said, including rising oil prices, weakening activity in emerging market economies – China in particular, and a slowdown in world trade growth as a result of weakening global demand.
Padoan added: ‘Government action will continue to be critical, particularly in the euro area, where unfinished policy business on fiscal frameworks, financial firewalls and fundamental structural reforms must move ahead.’
