The Paris-based organization expects the economies of euro-zone powerhouse Germany and fiscally troubled Italy to contract. Germany’s gross domestic product is set to fall 1.4% in the fourth quarter on an annualized basis, leading the weighted average GDP of the three biggest euro-zone economies to fall 0.4%, according to the OECD’s interim economic forecasts.
The forecasts suggest Italy’s GDP will fall 0.1% in the third quarter on an annualized basis before barely returning to growth at 0.1% in the fourth quarter.
“Growth is turning out to be much slower than we thought three months ago, and given the high uncertainty, the risk of a period of negative growth … has gone up,” OECD chief economist Pier Carlo Padoan said.
Why are they surprised? Most countries have been cutting spending. You can’t both ask for austerity and hope for jobs. Demand creates jobs.