Global economic recovery is slowing faster than expected and extra stimulus from governments may be needed, the OECD warned on Thursday.
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| Construction cranes work in Miami, 2008. |
Growth in the Group of Seven leading industrialised economies could slow to an annual rate of 1.5 percent in the second half of the year, the Organisation for Economic Cooperation and Development said in an interim assessment.
"Recent high-frequency indicators point to a slowdown in the pace of recovery of the world economy that is somewhat more pronounced than previously anticipated," the OECD said.
But the report also said that such an evaluation was subject to "great uncertainty" and that it remained unclear if the slowdown reflected temporary factors or whether it signalled deeper constraints.
It said that if the trend were deemed to be temporary, governments should withdraw their monetary support "for a few months" while continuing to curb public spending.
But on the other hand, if the latest sluggishness proved to be longer lasting, governments could boost stimulus measures, for example by continuing central bank purchases of corporate debt and maintaining interest rates close to zero.
The report added that if public finances permitted, planned budget cuts could be delayed.
The OECD said in the months ahead consumer spending, the principal motor in many advanced economies, could be constrained by unemployment and falling housing prices.
In addition, "a weak economy and uncertainty in sovereign debt markets might also affect adversely the financial system and private demand growth."
But the OECD also noted that the global economy could take advantage of several strengths, in particular robust corporate profits, inventory levels that should not warrant "a renewed rundown of stocks" and stablised overall financial conditions in most industrialised countries.
In its country-specific forecasts, the OECD foresaw growth in the United States of 2.0 percent in the third quarter this year and 1.2 percent in the fourth.
Japan should experience growth of 0.6 percent in the third quarter and 0.7 percent in the fourth.
For the eurozone, based on an average of the three largest members, Germany, France and Italy, the comparable figures are 0.4 percent and 0.6 percent.