The Organisation for Economic Cooperation and Development warns that the global economy may be slowing faster than previously believed.

In its interim economic assessment, released on Thursday, the OECD forecasts growth for the G7 countries at just 1.5% on an annualized basis in the second half of 2010. This is down from its previous estimate of growth of around 1.75%, which was forecast in the OECD’s May economic outlook.

The OECD says the loss of momentum in the recovery is temporary although uncertainty has increased. “The uncertainty is caused by a combination of both positive and negative factors,” said OECD chief economist, Pier Carlo Padoan. “But it is unlikely that we are heading into another downturn.”

The group suggests that consumer spending is likely to remain weak, but says that a combination of robust corporate profits and low business investment suggest that capital spending is unlikely to weaken further. It also believes that inventories are now close to desired levels, and so a renewed depletion of stocks is also unlikely.

Overall financial conditions have stabilized, the report notes, and growth remains strong in the major emerging-market economies.

The OECD’s short-term forecasting models show that U.S. GDP is expected to rise by 2.0% in the third quarter but then fall to 1.2% in the fourth quarter. For Canada, it sees growth of 2.2% in the third quarter, and 2.3% in the fourth.

In Japan, GDP growth is forecast at 0.7% in the fourth quarter after 0.6% in the third. The combined GDP of the three largest countries in the euro area is projected to grow at 0.4% in the third quarter, rising to 0.6% in the fourth quarter.

Padoan also said that the current stance of both fiscal and monetary policy should remain on course. However, he added that, if the slowdown in the recovery becomes entrenched, and the risk of downturn increases, additional monetary stimulus in the form of quantitative easing and keeping interest rates close to zero for a longer period may be necessary. Countries with more fiscal space could also delay plans for fiscal consolidation, if necessary.

IE