OECD says US, Europe set to exit recession in third quarter

The United States and the eurozone are on track to jump out of recession in the third quarter of this year but the outlook is still highly uncertain, the OECD said in a report released yesterday.

The Organisation for Economic Cooperation on Development, a Paris-based grouping of 30 developed economies, forecast annualised quarterly growth of 1.6 per cent in the US economy and 0.3 per cent in the euro area.

But the report on G7 economies gave a margin of error of 1.9 per cent for the US forecast and of 1.3 per cent for the eurozone forecast, underlining uncertainty and implying that recession could endure in both the economic giants.

"Given the positive economic news and based on incoming high-frequency indicators, OECD short-term forecasting models point to an earlier recovery than envisaged a few months ago," the OECD said.

"Nonetheless, numerous headwinds imply that the pace of the recovery is likely to be modest for some time to come," it added.

The report also forecast continued recession in Britain, with negative economic growth of one per cent and a margin of error of 1.2 per cent. The forecasts for Japan and Canada were 1.1 per cent growth and two per cent contraction respectively, with margins of error of 2.9 per cent and 1.6 per cent.

Meanwhile, a closely-watched revised survey showed yesterday that the eurozone economy expanded in August for the first time after 15 months of business contraction.

The final purchasing managers' index for the 16 countries that use the euro single currency, compiled by data and research group Markit, rose to 50.4 points in August from 47 points in July - crossing the 50-point line that indicates economic activity returning to growth. It marks the first time that the index has entered positive territory since May 2008.