G8 Summit: Economic Crisis in Asia Keeps US Growth in Check

The Birmingham Post (England), May 12, 1998 | Go to article overview

G8 Summit: Economic Crisis in Asia Keeps US Growth in Check


During the past 12 months the producer price index has fallen 1.8 per cent in the United States.

Many economists have linked the downward pressure on goods prices to the economic crisis in Asia, which has reduced worldwide demand for commodities.

The decline was led by energy prices, which tumbled 1.9 per cent in the month and have declined a hefty 10.4 per cent since a year ago.

Last month, food prices slid 0.4 per cent, while passenger car costs edged up a slight 0.1 per cent.

Separately, the department reported that initial claims for state unemployment insurance fell to 308,000 in the first week of April, the lowest level in a month which signals the continued strength in the labour market.

The drop from the previous week's total of 310,000 new claims was unexpected.

The Organisation for Economic Co-operation and Development said US inflation should remain under control despite tight labour markets, but it highlighted a number of other risks and uncertainties.

With activity slowing as a result of weak export demand and inflation being held back by the strength of the dollar, the OECD Secretariat projections assume that there is now little likelihood of any increase in short-term rates until the end of 1999.

It said growth in the US economy would slow to 2.7 per cent in 1998 from 3.8 per cent in 1997 as the Asian crisis cut into US exports.

The OECD's projection suggests a soft landing for the economy, with growth easing back spontaneously and inflation staying under control

Despite likely stability in short term interest rates, US policy makers are urged to be on guard as labour markets will remain tight

The unemployment rate was projected to fall to 4.8 per cent in 1998 from 4.9 per cent in 1997.

For the first quarter of this year, growth was strong.

"Few signs of a slowdown are evident yet," the report said.

But the impact of the crisis in Asia on US exports would increase and cut into growth later this year, it added.

The OECD estimated that the fall in domestic demand in East Asia may lower the growth of US export markets in the region by 7 percentage points between 1997 and 1998, equivalent to 0.2 per cent of gross domestic product.

Economic growth will slow further in 1999, and as fall out from the crisis in Asia diminishes, inflation may pick up. …

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