PARIS – Prospects for economic growth in the United States and the eurozone have improved and are predicted to hit 2.6 percent and 2 percent this year, the Organization for Economic Cooperation and Development said Wednesday.
Overall forecasts for real GDP growth in the OECD's 34 member states, comprising most of the world's major economies, remained steady at 2.3 percent in 2011.
Japan stands out negatively. Its economy is now predicted to contract by 0.9 percent because of the March earthquake that devastated hundreds of homes and businesses along the northeast coast.
The Paris-based OECD had predicted last November that real GDP in Japan would grow at a modest 1.7 percent, on a par with the eurozone, and that the United States would expand by 2.2 percent.
Global growth is now pegged at between 4.25 percent and 4.5 percent this year.
Whether this will translate into genuine improvements in living standards is unclear. The OECD has acknowledged that GDP is a limited gauge which doesn't reflect many changes in quality of life. Earlier this week the organization launched a separate index to measure people's expectations and governments' abilities to meet them.
But the OECD said it would cling to GDP as a key measure of the speed, if not direction, of the global economy for the foreseeable future.
The OECD said the biggest risks stem from a fresh jump in oil prices due to political unrest in the Middle East, disruption of the global manufacturing chain due to Japan's earthquake, and the possibility of a sharper than predicted slowdown in China if Beijing's efforts to stem inflation strangle lending.
China isn't an OECD member but the group examines its economy anyway because of the country's growing economic clout.
Reducing government debt should be a priority in the coming months, the OECD said, citing in particular the United States and Japan. "In some countries this will require unblocking political stalemate that makes fiscal policy unpredictable over both short and long horizons."
Europe, too, remains in a fragile state because of the heavy cost of financing bailouts for Greece, Portugal and Ireland. All three countries will have to fulfill their pledge to reduce government debt, said OECD chief Angel Gurria.
He saw little chance that a similar rescue package might be needed for Spain.
"I think Spain has done its homework," Gurria told The Associated Press. "Spain is doing everything to decouple itself from the countries that are in crisis."
GDP forecasts for OECD member states in 2012 remained at 2.8 percent, as predicted in November.
OECD Economic Outlook: http://bit.ly/lnQ9Wh
LONDON – Britain's economy grew 0.5 percent in the first quarter of this year, according to statistics released on Wednesday as the OECD cut its own growth forecasts for the country and warned that the Bank of England should raise interest rates to dampen public expectations of high inflation.
The news that the Office for National Statistics had left its estimate unchanged in its first revision of the data means the British economy is treading water — the first-quarter growth simply cancels out a 0.5 percent decline in gross domestic product in the last quarter of 2010.
The expansion in the first three months of the year was largely due to export growth, which countered the biggest decline in consumer spending for almost two years.
Household spending declined 0.6 percent in real terms, its biggest drop since the second quarter of 2009 after consumers were squeezed by the failure of wages to keep pace with inflation. That followed a 0.3 percent drop in the final quarter of 2010.
Business investment also declined 7.1 percent quarter-on-quarter, in its biggest fall for two years
In more positive news, the deficit for net trade decreased to 5.7 billion pounds in the quarter, from 11.5 billion pounds the previous year, as exports increased and imports decreased. That was its biggest upward contribution to growth from net trade since records began in 1955.
IHS Global Insight economist Howard Archer said the data reinforced concerns about the underlying strength of the economy and its ability to withstand tough government austerity measures via spending cuts that began taking effect from April.
"The muted first-quarter rebound in GDP growth — and somewhat mixed data and survey evidence for the second quarter so far — reinforces our suspicion that growth will be limited going forward as the fiscal squeeze increasingly kicks in, some temporary growth drivers wane and consumers limit their spending in the face of serious headwinds, most notably the major squeeze on their purchasing power," said Archer.
Prime Minister David Cameron has pledged 80 billion pounds ($130 billion) of spending cuts and 30 billion pounds in extra taxes to trim Britain's huge deficit, but opponents say the austerity measures risk sending the country backward into a double-dip recession.
The data was released as the OECD cut its growth forecasts for the British economy to 1.4 percent this year and 1.8 percent next year — the third time it has downgraded its outlook for the country since November. The figures contrast with forecasts of 1.7 percent and 2.5 percent, respectively, from the Office for Budget Responsibility — the data officially accepted by the British government.
In its twice-yearly update on world economic growth, the OECD supported the Bank of England's decision to keep interest rates unchanged at a record low of 0.5 percent since March 2009 in the face of fiscal tightening, but said that it should raise rates to 1 percent by the end of this year to stave off inflation expectations.
Consumer price inflation hit 4.5 percent on an annual basis in April — more than double the central bank's target — and Governor Mervyn King warned Britons earlier this month that it is likely to reach 5 percent later this year.
Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club economic consultancy, was more upbeat, saying he believed the statistics office data understates the underlying strength of the economy.
"Clearly this is not a 'normal' recovery but evidence from the business surveys and the labour market suggests that there is some forward momentum," Goodwin said.
The estimate will be revised one more time next month — each revision adds newly gathered data to give a fuller picture.
HORSHAM, Pa. – Luxury homebuilder Toll Brothers Inc. is reporting a smaller loss in its fiscal second quarter both home deliveries and new contracts picked up.
The company said Wednesday it lost $20.8 million, or 12 cents a share, in the three months ended April 30. That compares with a net loss of $40.4 million, or 24 cents a share, a year ago.
Revenue grew 3 percent to $319.7 million from $311.3 million a year earlier.
Analysts polled by FactSet were expecting a loss of 4 cents a share on revenue of about $320.5 million.
The builder's new home contracts increased 8 percent to $500.9 million in the January to April period, while the number of delivered homes rose 9 percent to 591. The average price for delivered homes rose 1 percent.