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Last Updated: Tuesday, 28 November 2006, 11:16 GMT
Weak US 'to hit global growth'
US home available sign
The US housing market is going through a turbulent period
World economic growth will slow to its weakest level in four years in 2007, dragged down by a US slowdown, a global think tank has predicted.

Growth will slow to 2.5% in 2007 from 3.2% this year, the Organisation for Economic Cooperation and Development (OECD) said.

But a strong performance from Europe and Asia will offset US weakness.

"Rather than a major slowdown, what the world economy may be facing is a rebalancing of growth," the OECD said.

It added that as a result of a "soft landing" for the US economy the slowdown would be nowhere near as bad as the "major" problems experienced in 2000, when most economies were overheating.

The group predicts US growth will come in at 3.3% this year before slackening to 2.4% in 2007 - mainly as a result of the country's weak property market, which the OECD expects will see a further fall in house building.

'Rebalancing'

"Recent developments point to an unwinding of cyclical differences, with activity having slowed in the United States and Japan, and gathered speed in Europe," OECD chief economist Jean-Philippe Cotis said.

"In the euro area, recent hard data as well as business and consumer confidence suggest that a solid upswing may be underway.

"Growth should remain buoyant in China, India and Russia and other emerging economies."

In contrast to the expected deceleration in the US, the OECD's twice-yearly report revised up its expectations for the eurozone to growth of 2.6% for this year and 2.2% next year.

The report also suggested that the European Central Bank would have to carry on raising rates until they reached a peak of 4% in 2008. Euro zone rates currently stand at 3.25%.

Meanwhile, across the Atlantic the OECD said the US would leave rates on hold at 5.25% throughout 2007, before cutting the cost of borrowing in 2008.

But it warned that any risk of higher inflation would mean higher US rates.


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