The world economy is in good shape, with a robust recovery in Europe, strength in Asia and a benign outlook for price stability, the Organisation for Economic Cooperation and Development said yesterday.

The club of advanced economies said that financial conditions were still favourable despite below-average growth in the US and the recent jitters on world stock markets.

In forecasts for the first half of 2007, the OECD projected that growth in the G7 group of wealthy nations would slow to 0.5 per cent in the first quarter but pick up to 0.6 per cent in the second quarter.

The UK would see GDP growth slow slightly, to 0.6 per cent and 0.7 per cent in the first and second quarters respectively, after the 0.8 per cent growth rate of the final quarter of 2006.

But the group welcomed the ?global rebalancing? under which growth in Asia and continental Europe is set to pick up the slack from a ?soft landing? caused by weak residential investment in the US. The expansion in Japan was on track, it argued, despite a lacklustre level of consumer spending.

Jean-Philippe Cotis, the OECD?s chief economist, said: ?Life?s full of surprises, but at this stage we don?t see any immediate reason for leaning towards a more pessimistic scenario.? He said there was no compelling case for the US to put up interest rates again for the time being, but maintained his previous recommendation that rates in the eurozone rise by another quarter point, to 4 per cent.

Inflation, however it was measured, was basically in check, Mr Cotis said.

The report was upbeat on prospects for stock markets. ?On the whole, financial conditions are still favourable,? it said.