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What is the near-term global economic outlook?

The global economy has weakened since spring, led by developments in the euro area where recession is again taking hold.

Ongoing balance-sheet adjustments and renewed declines in consumer confidence have kept household demand soft in many countries.

Business investment growth has also been slowing, except in Japan where post-disaster reconstruction continues. In the euro area, weakness in the periphery is spilling over to the core.

The renewed intensification of the euro area crisis and falling output there have had adverse effects on confidence globally. Business confidence is particularly weak in the euro area and has dropped recently in the United States and Japan.

The weakening in business confidence has been particularly evident in manufacturing sectors.

Consumer confidence is weakening in most major economies. It is particularly weak in the euro area, and this is reflected to some extent in sharply contracting levels of lending to households.

With the euro area crisis still the most important risk for the global economy, further policy action is needed to instil more confidence in the monetary union.

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*Excerpts of OECD interim assessment, September 2012

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