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OECD Sees Contrasting Economic Trends In U.S. & Europe


The Organization for Economic Co-operation and Development estimates robust growth in the United States, but sees Europe remaining more fragile where weak confidence, rising unemployment and tight credit point to further fall in activity.

In the latest interim economic assessment, released Thursday, the Paris-based organization said there will be decoupling of GDP growth between the U.S. and Canada on the one hand, and Europe on the other.

Economic growth in the U.S. is seen at 2.9 percent in the first quarter and 2.8 percent in the second quarter of 2012. In November, the think-tank forecast 1.7 percent growth for the first quarter and 1.9 percent for the second quarter.

The ongoing rebound in employment, stronger consumer confidence, higher equity prices and credit growth are underpinning the U.S. recovery. Canada is projected to grow 2.5 percent each in the first two quarters.

In the euro area, Germany, France and Italy together will shrink by 0.4 percent on average during the first quarter, before a moderate 0.9 percent growth recovery in the second quarter, the think tank said.

Individually, Germany is estimated to grow 0.1 percent in the first quarter before the pace accelerating to 1.5 percent in the second.

The outlook for France is more muted, with a 0.2 percent reduction seen for the first quarter, followed by 0.9 percent rise in the second. Meanwhile, weak industrial output as well as household sentiment suggest recession during the first half of the year, the OECD said.

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, the group said. The OECD urged Eurozone finance ministers to strengthen the firewall.

Growth is predicted to rebound strongly in Japan in the first quarter, with the economy seen expanding 3.4 percent. Thereafter the pace is expected to slow to 1.4 percent in the second quarter. In November, 1.8 percent growth was predicted for each of the two quarters.

Throughout the first half of 2012, growth in the G7 nations will be firm, the OECD assessed. Despite a strong variance in outcomes across the countries, overall growth is seen at 1.9 percent in both the first and second quarters.

The OECD sees technical recession in the U.K., with GDP falling 0.4 percent in the first quarter, after contracting in the final quarter of 2011. Nonetheless, a moderate recovery is expected in the second quarter.

The think tank cites rising oil prices and weak economic activity in emerging markets as major threat to the recovery process.

by RTTNews Staff Writer

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