Output growth in the OECD as a whole is likely to be around 2 per cent in 1994, the fourth year in succession when it has been below estimates of potential growth. A number of economies were growing very rapidly in 1990 and 1991, and capacity was stretched in both Germany and Japan. However, subsequent recession has taken these economies to levels of capacity utilisation and unemployment that have resulted in downward pressure being put on wage and price inflation. Inflation generally falls in recessions, and the fall from an OECD average inflation rate of 4.5 per cent in 1990 to around the 2.5 per cent projected for 1994 is not without precedent. However, the prospects for inflation over the next few years look a little better than one might expect in an upturn, and we are forecasting that OECD consumer price inflation will stay around 3 per cent for the next few years.