Rebalancing continues

US growth is shifting to a lower gear, while Europe’s robustness is confirmed. This is the key message from the OECD’s chief economist, Jean­Philippe Cotis, in his forecast update briefing on 13 March. Mr Cotis reiterated the view expressed in the latest Economic Outlook published in November that a global rebalancing was under way. The March interim assessment also sees the Japanese expansion continuing, despite lacklustre household consumption. The German recovery has been particularly vigorous and euro area growth should remain above trend, with business sentiment upbeat and faster job creation supporting household incomes and consumption.
Oil prices remain jittery, Mr Cotis warned, but are much lower than half a year ago, contributing to easing inflationary pressures. And despite some volatility in equity prices in recent weeks, on the whole financial conditions were still favourable.US growth has been below potential since mid-2006, and Mr Cotis saw no compelling case for the time being for the US Federal Reserve to resume tightening. Though fiscal outcomes in the OECD have been more favourable than budgeted, reforms were still a matter of urgency because of ageing populations, pension and healthcare pressures, Mr Cotis said. The next OECD Economic Outlook will be published 24 May. For more detail, visit www.oecd.org/economics


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