2010.09.0908:26:00UTC+00OECD: Recovery Slowing Faster Than Anticipated, Yet Another Downturn Unlikely

Global economic recovery may be slowing "faster than previously anticipated", the Organization for Economic Cooperation and Development said on Thursday.

"The loss of momentum in the recovery is temporary although uncertainty has increased," the group said. In its latest Interim Economic Assessment, the Paris-based think tank projected growth in the Group of Seven nations to be nearly 1.5% in the second half of the year, slightly weaker than its 1.75% estimate from May.

"The uncertainty is caused by a combination of both positive and negative factors," said OECD Chief Economist Pier Carlo Padoan. "But it is unlikely that we are heading into another downturn."

Additional monetary stimulus in the form of quantitative easing and near-zero interest rates for a longer period may become necessary, if the slowdown in the recovery becomes entrenched, and the risk of downturn increases, Padoan said. Further, countries with more fiscal space could also delay plans for fiscal consolidation, he said. The current stance of both fiscal and monetary policy should remain on course, the economist added.

OECD expects consumer spending to remain weak. However, the group said capital spending is unlikely to weaken further given the combination of robust corporate profits and low business investment. Furthermore, a renewed depletion of stocks is also unlikely as inventories are now close to desired levels.

Further, the OECD report said overall financial conditions have stabilized and growth remains strong in the major emerging-market economies. The U.S. economy is expected to expand 2.0% in the third quarter, but then moderate to 1.2% growth in the final three months of 2010. For Japan, GDP growth is forecast at 0.7% in the fourth quarter after 0.6% in the third quarter.

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