OECD: First half growth to slow in rich economies

Growth in leading rich economies will slow in the first half of this year, with the United States and Japan outpacing sluggish Europe, the OECD group of developed countries said Wednesday.

The Paris-based Organization for Economic Cooperation and Development links the slowdown to the end of some government stimulus programs and the emptying of inventory stocks – all while the recovery and labor markets remain frail after the worst global recession in decades.

Most of the growth this year is expected in countries not addressed in the report, such as China, India and Brazil.

Still, “overall it is an encouraging picture,” OECD chief economist Pier Carlo Padoan told a news conference about the agency’s report on the Group of Seven industrial economies. “It is stronger in the United States and Japan, it is not as strong in Europe.”

The OECD forecast that U.S. gross domestic product would rise 2.4 percent in the first quarter and 2.3 percent in the second quarter, down from 5.6 percent in the fourth quarter of last year. Forecasts for Japan are 1.1 percent and 2.3 percent for the first two quarters of 2010, down from 3.8 percent in the fourth quarter 2009.

Forecasts for Germany fell, however, blamed on a slump in construction activity.

The OECD urged rich governments to end stimulus programs next year or earlier to avoid sinking deeper into debt. But it warned that they should do so gradually and carefully.

“Despite some encouraging signs on 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,” the report said. “Consolidation should start in 2011, or earlier where needed, and progress gradually so as not to undermine the incipient recovery.”