Oecd Issues Slump Warning

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US economic growth will slow sharply in the second half of the year and the risk of it going into a full-scale slump cannot be ruled out, the OECD warned yesterday.

In updated 2007 forecasts, the Paris-based group predicted that the combined Group of Seven economies will grow by 2.2 per cent this year, compared with a previous forecast made in May of 2.3 per cent, while the US economy will grow by 1.9 per cent instead of 2.1 per cent.

The French economy is now forecast to expand by 1.8 per cent instead of 2.2 per cent, while Germany was marked down to 2.6 per cent instead of 2.9 per cent.

The OECD suggested that worse might be to come, stressing that the new forecasts were based on backwards-looking data for the second quarter, with the consequences of last month’s financial market turmoil still to be assessed.

OECD chief economist Jean-Philippe Cotis stressed that the May forecasts were ‘not revised that much’.

He added: ‘However, year averages mainly reflect past developments and prospects going forward are now clearly less buoyant and more uncertain.

‘Downside risks have become more ominous, in a context where overall financial market conditions are likely to remain durably tighter.’

• The day before it sets the UK’s base interest rate, the Bank of England (BoE) yesterday increased the amount of cash banks can deposit with it and then use when they need overnight funding.

It has increased the amount of funds banks can deposit with it by six per cent to £17.6bn, and said it was prepared to increase this by a further 25 per cent if needed.

• Second News story

Council pay offer rejected

UNISON said yesterday that a meeting of the union’s industrial action committee will be arranged ‘in the near future’ to consider authorising a ballot for strike action over local government pay.

This comes after representatives of UNISON’s local government members on Tuesday voted to reject the employers’ revised offer of 2.475 per cent and a new minimum rate on scale point 4 of £6 per hour.

The NJC committee – UNISON members of the sector’s negotiating body, the national joint council – decided to ask the union’s local government service group executive and industrial action committee to authorise an industrial action ballot.

The GMB trade union is holding a recalled lay delegates’ conference for local government members today to consider the new pay offer.

The union said: ‘GMB negotiators will be recommending to the conference that the next step should be a full consultation with the members about the new offer and that during this time the moves to an industrial action ballot should be suspended.

‘If the GMB recalled lay delegate conference agrees to these recommendations then GMB will move to consult its members in the workplaces and will suspend the industrial action ballot.’