The economies of the developed world have had their worst quarterly showing in decades, the Organization for Economic Cooperation and Development said on Monday, even as more signs emerged that the pace of the decline was easing.
The combined gross domestic products of the 30 countries in the organization fell 2.1 percent in the first quarter when compared with the previous quarter. If that preliminary estimate holds, it would be the largest drop since 1960, when the organization began collecting such data. The G.D.P. of member countries fell 2 percent in the final quarter of 2008.
“The figures confirmed the impression that we already had from the individual countries’ reports,” said Jörg Krämer, chief economist at Commerzbank in Frankfurt. “It shows the world economy was in free fall in the final quarter of last year and the first quarter of this year.”
Despite the dismal data, Mr. Krämer said that “the economy is now in its landing approach.” He predicted that the world economy would begin to expand modestly in the fourth quarter of this year, followed by “subpar growth” in 2010.
In Japan, the government on Monday raised its assessment of the economy, saying that while corporate profits and business investment continue to decline, the tempo of worsening in the economy was “moderating” as exports and industrial production neared what appeared to be a bottom.
Mr. Krämer said recent purchasing managers’ data from China and the Institute for Supply Management’s index of nonmanufacturing businesses in the United States also supported the conclusion that “the recession could be over by autumn.”
“I’m quite cautious,” he said, “but this is what the facts say.”
Among the seven largest O.E.C.D. economies, only in France — where the economy shrank 1.2 percent — did the rate of contraction ease in the first quarter, the organization said. The organization estimated Canadian first-quarter growth because official data was not yet available.
The O.E.C.D. economies accounted for 71 percent of world G.D.P. in 2007, according to the World Bank. Those economies shrank 4.2 percent in the first quarter from a year earlier. The United States contributed 0.9 percentage point of that decline, while Japan contributed 1 percentage point, the 13 largest euro-zone countries 1.3 points, and the remaining member countries 1 point.
China, which is not a member of the organization, reported that its economy continued to grow in the first quarter.
I’m not an economist so when I read “the largest drop since 1960” alarm bells sound and warning flags start waving. Despite the optimistic predictions no one can pre-judge the outcome of a world wide recession. Except for one thing – there will be more and more deficit spending by governments to avoid the spectre of social unrest (read, revolution).