According to the OECD’s latest Interim Economic Assessment the pickup in activity seen in the G7 countries in the last quarter of 2009 is expected to ease back in the first half of this year.
The gross domestic product (GDP) seems to grow faster in the US than in Japan and the three largest countries in the European Union – Germany, France and Italy. But still it will remain generally fragile. Consumer and business demand is suffering especially from sluggish credit growth and difficult labour market conditions.
Based on the most recent data, the OECD short-term forecasting models show that US GDP is expected to rise by 2,4 % in the first quarter of this year and 2,3 % in the second. The combined GDP of the three largest countries in the euro area is projected to grow at 1.9% in the second quarter after 0.9% in the first three months of the year. In Japan, GDP growth is forecast at 2.3% in the second quarter of 2010 after 1.1% in the first. Fourth quarter 2009 GDP grew by 5.6% in the US; by 0.4% in the three largest countries of the euro area and by 3.8% in Japan.
Presenting the Interim Economic Assessment for G7 countries, OECD Chief Economist Pier Carlo Padoan said: “Although we are seeing some encouraging signs of stronger activity, the fragility of the recovery, a frail labour market and possible headwinds coming from financial markets underscore the need for caution in the removal of policy support.”
Mr Padoan said financial conditions have improved considerably. Despite their improved capital positions, banks, however, remain vulnerable to credit losses. He added that the unemployment rate has edged down in the United States and Japan and may well have peaked in the euro area.