GDP growth in the OECD group of economies moderated in the first quarter of 2011, reflecting a contraction in output in Japan related to the earthquake in March 2011 and a slowdown in the US economy. This was partly offset by an acceleration of growth in the Euro Area, to some extent attributable to a weather related rebound in Northern Europe, but also a strong rise in business investment in Germany and France. Moderate growth at the OECD level persisted into the second quarter. Supply-chain disruptions continued to affect Japan; the high oil price eroded real wages, exacerbating the effect of high unemployment on consumption in the US; the deepening sovereign debt crisis in Europe raised uncertainty, leading to a rise in precautionary savings even in countries not restrained by severe fiscal austerity programmes. Outside the OECD, China and India continue to drive world growth, although rising inflation points to more moderate prospects in the second half of the year. We forecast global GDP growth of about 4½ per cent per annum in both 2011 and 2012, compared to 5 per cent growth recorded in 2010. The key assumptions underlying this forecast are discussed in Appendix A, with our forecasts for key macro variables in 40 major economies detailed in Appendix B.