Global economic growth that emerged in the fourth quarter of last year is expected to slow in the first half of this year, the Organization for Economic Cooperation and Development said Wednesday.

In its latest economic assessment the OECD said that gross domestic product is likely to grow faster in the United States than in Japan and the three largest euro area countries – Germany, France and Italy — “but will remain generally fragile as inventory destocking by businesses and the ending of some fiscal stimulus measures weighs on activity. Consumer and business demand is likely to suffer from sluggish credit growth and difficult labour market conditions.”

The OECD short-term forecasting models show that U.S. GDP is expected to rise by 2.4% and 2.3% in first and second quarters this year. Canada is forecast to grow at a more robust 6.2% in Q1 and 4.5% in Q2.

The combined GDP of the three largest countries in the euro area is projected to grow at 1.9% in the second quarter after 0.9% in the first three months of the year, the group said. In Japan, GDP growth is forecast at 2.3% in the second quarter of 2010 after 1.1% in the first.

“Although we are seeing some encouraging signs of stronger activity, the fragility of the recovery, a frail labour market and possible headwinds coming from financial markets underscore the need for caution in the removal of policy support,” said OECD chief economist, Pier Carlo Padoan.

Padoan added that financial conditions have improved considerably, but cautioned that, despite their improved capital positions, banks remain vulnerable to credit losses.

IE