UK growth stronger than other G7 nations, say OECD report

The UK will see the strongest growth among all of the G7 nations in the third quarter despite a sharply slowing recovery, economic forecasters said today.

But the latest report from the Organisation for Economic Co-operation and Development (OECD) painted a gloomy overall picture for the seven major economies and warned more central bank support may be needed.

It said the G7 slowdown was worse-than-expected and stressed policymakers may need to step in by extending measures such as quantitative easing (QE), while governments could be forced to put austerity measures on hold.

The OECD forecast that growth in the G7 economies would slow to 1.4% in the third quarter after expansion of 3.2% and 2.5% in the first and second quarters respectively.

The Paris-based think-tank believes gross domestic product (GDP) will pull back to 1% in the fourth quarter.

The OECD said: "It is not yet clear whether the loss of momentum in the recovery is temporary... or whether it signals greater underlying weaknesses in private spending at a time when policy support is being removed."

If temporary, economies should hold monetary support efforts and continue with spending cuts.

"On the other hand, if the slowdown reflects longer-lasting forces bearing down on activity, additional monetary stimulus might be warranted in the form of QE and commitment to close-to-zero policy interest rates for a long period.

"Where public finances permit, planned fiscal consolidation could be delayed," it added.

The report predicts third quarter annualised quarter-on-quarter growth of 2.7% in the UK, down from 4.9% in the previous three months, but higher than all its European neighbours in the G7 and the US.

UK growth is expected to fall back to 1.5% in the fourth quarter, although this is still among the strongest forecasts in the G7 block.

America's forecast growth stands at 2% in the third quarter and 1.2% in the fourth.