For the first quarter of 2012, provisional data shows that economic growth among the OECD area (most of the key global economies) was up 1.6% from the first quarter of 2011. This was slightly stronger than fourth quarter 2011’s gain of 1.4% year-to-year comparison, but well below the 2.2% growth rate for all of 2011.

 

Japan posted positive economic growth, with a gain of 2.6% in the first quarter of 2012, when compared to the same quarter in 2011. This was the largest gain among the major OECD countries. The U.S., with a gain of 2.1%, posted the second largest economic growth rate first quarter year-to-year.

 

The Euro area economies posted disappointing economic results. Italy and the United Kingdom (not technically a Euro country) experienced shrinking economies. France’s economy was essentially stagnant. Germany posted a relatively solid 1.2% growth of its economy, despite the economic mayhem occurring in many of its Euro neighbors.

 

OECD Bullish On U.S. & Japan

The OECD says that economic growth should continue to strengthen in the U.S. due to stronger confidence in both businesses and households. Financial markets are firming, and households are deleveraging.

 

In Japan, the economy continues to gain momentum, with solid economic growth expected near term. The good news: debt levels are falling in Japan. However, the OECD argues that the country will need continued structural reforms, if it is to show significant long-term growth.

 

OECD Bearish on Europe

Recent events in Europe have caused OECD forecasters to increase the possibility of downside risks, which could affect the global economy. The Euro area is expected to show no economic growth in 2012, with several countries in a recession. A combination of enduring financial fragility, rising unemployment, and social pain may spark political contagion and have an adverse impact on potential economic growth in 2013, according to the OECD.

 

Diamond-Consuming Countries Show Mixed Economic Growth

By major diamond-consuming country, the OECD has published the following outlook:

 

·        United States – Regained momentum.

·        United Kingdom – Appears to be at a turning point (positive).

·        Japan – Regained momentum.

·        Germany – Current economic activity below long-term trend.

·        Italy – Continued sluggish activity.

·        France – Continued sluggish growth.

·        Canada – Economic activity in line with long-term trends.

·        Brazil – Turning point (positive).

·        China – Regained momentum.

·        India – Turning point (positive).

·        Russia – Signs of regained momentum.

 

Forecast Risks

The OECD has listed three key assumptions related to its latest economic forecast:

 

·        Policy actions will be sufficient to prevent destabilizing Euro area developments.

 

·        There will be no major disturbances that would affect oil prices.

 

·        The U.S. will not implement a disruptive fiscal policy in the post-election period.