OECD members feel impact of US economic slowdown

The impact of the slowing US economy on the rest of the world was laid bare yesterday by figures showing that the rate of economic growth across OECD member countries fell sharply in the second quarter.

In a sign that the global economic tide may be turning, GDP (gross domestic product) growth in the three months until the end of June slowed to 0.7 per cent on the previous quarter. This was down from growth of 1 per cent in the first quarter of 2006 - the OECD area's best performance in at least two years.

In the US, where recent data has pointed to an economy that is past its peak, GDP increased by 0.6 per cent in the second quarter, a sharp slowdown from the 1.4 per cent growth it managed in the first three months of the year.

The dovish tone struck by the Federal Reserve when it kept US interest rates on hold at 5.25 per cent earlier this month sparked fears that it may be more worried about the economy than Ben Bernanke, its new chairman, had previously let on.

A cooling housing market, high energy prices and the cumulative effect of 17 straight interest rate rises has put the brakes on the world's biggest economy. Tame US inflation data last week reinforced Mr Bernanke's picture of a slowing economy.

Japan's economy was similarly lacklustre in the second quarter of the year: GDP there edged just 0.2 per cent higher, down from growth of 0.7 per cent in the previous quarter.

Conversely, the euro area, which comprises the 12 countries that have adopted the currency, enjoyed its strongest quarter since early 2000. GDP across the eurozone rose by 0.9 per cent in the second quarter.

Despite the economic pause across the Atlantic, the US contributed twice as much to total OECD growth - 1.3 percentage points - as the euro area during the second quarter.

On an annual basis, OECD GDP grew by 3.1 per cent in the second quarter, with the UK growing by 2.7 per cent and the US by 3.5 per cent.

The euro area managed 2.6 per cent growth over the same period.