Outlook for high-income OECD countries,

The intensification of the financial crisis in the United States, and its widening to major European countries in the autumn of 2008, is expected to exact a significant toll on economic activity across the high-income countries belonging to the Organisation for Economic Co-operation and Development (OECD).
Even if confidence in global credit markets is restored quickly, reductions in the finance available for firms and consumers, coupled with a slowdown in developing-country import demand, have set the stage for a recession in the United States, Europe, and Japan beginning in the second half of 2008 and lasting into 2009.

A movement to joint recession across key OECD countries.
Through the first quarter of 2008, the slow¬down among the OECD countries was fairly moderate (although industrial production stagnated in the quarter): exports benefited from strong import demand from developing countries and from oil exporters, while falling imports served to boost the contribution of net trade to GDP growth.
But GDP fell to 0.3 percent growth (at an annual rate) in the second quarter for the key advanced economies, down from 2.4 percent in 2007; and as GDP growth moved to decline across the United States, Europe, and Japan during the third quarter, OECD growth dropped to —0.6 percent.
Industrial production slipped to negative ground across all major OECD economies in both the second and third quarters of the year, as fading overseas demand combined with a lack of domestic orders tied to sluggish conditions in housing and autos in a number of countries (see table of indicators, first and second panels).

Growth of export volumes dropped from 14.6 percent in 2007 to 2.5 percent during the third quarter (saar), as intra-OECD trade (especially within Europe) softened at the same time as developing-country demand slowed.

During the second quarter, conditions in Europe and Japan deteriorated sharply.
Japan’s GDP declined at a steep 3.7 percent seasonally adjusted annualized rate (saar), and Euro Area GDP fell 0.7 percent (see first chart here and table of indicators, first panel).

A falloff in household spending tied to the effects of much higher inflation, a decline in investment, and a dramatic shift in the growth contribution of trade all contributed to the turnaround.
In Europe, increased sluggishness in export markets and the long bout of euro appreciation pressured exports and imports into negative territory in the second quarter, with contributions to overall growth slipping to nil from 1.4 points in the final quarter of 2007.

In the United States, conversely, GDP picked up 2.8 percent (saar) in the second quarter, as fiscal stimulus and looser monetary policy boosted consumption spending.
Moreover, the pace of decline in residential investment slackened, while contributions from trade—still benefiting from the weak dollar— increased to a large 1.6 percentage points of growth (see second chart here).

U.S. domestic demand has been depressed since the final quarter of 2006, as a rise in domestic savings helped to unwind the global imbalances that were of such concern a couple of years ago.
As financial dislocations heightened in the third quarter, including unprecedented declines in equity mar¬kets in Europe, Japan, and the United States, consumer spending came under increasing pressure (see third chart here).2

And with export performance for OECD economies fading on the back of sputtering global demand, the Euro Area and Japan fell into technical recession in the quarter, while growth in the United States reverted to decline.