It's not just the United States economy that's in trouble. It's
For six years or so, the thriving US economy was the center of
demand for goods from around the globe. Last year, it sucked in
$360 billion more of imports than it exported. Now the American
economy has slowed sharply.
"It's not good for the world economy," says Clyde Prestowitz,
president of the Economic Strategy Institute in Washington.
Indeed, there is a scramble in several countries to avoid, if
possible, the drag from the slowing US economy.
The Bank of Canada, for instance, last Wednesday reduced a key
interest rate from 5.75 percent to 5.25 percent, after a quarter
point cut in January. Canada ships about 85 percent of its exports
to its southern neighbor.
A day later, Australia's central bank reduced its benchmark
interest rate for the second time in four weeks. It, too, is
attempting to ward off a slump.
Also, China, which exports heavily to the US, rolled out a budget
last week that is $31 billion in the red. A boost in public-works
and military spending is partly aimed at generating a 7 percent
growth rate this year after inflation.
Other central banks that cut rates last month include South
Korea, the Philippines, Hungary, Denmark, and Turkey. Turkey acted
after sinking into a financial crisis.
Global output this year will still grow 2.6 percent after
inflation, reckons Consensus Economics in London. The firm uses
predictions of more than 200 forecasters around the world to come
up with its consensus forecast, weighted by the size of national
That forecast indicates "an unusually large drop" from 3.9
percent real growth in the world in 2000, says editorial director
Jeremy Weltman. He expects a further drop in a monthly poll taken
The US is the biggest factor in the world slowdown because it
produces 20 percent of global output. The latest Federal Reserve
survey of regional economic conditions shows business activity has
slowed to a crawl in some areas.
Europe is offering the largest positive influence on the world.
Though slowing a little, the European economy is still expected to
grow a healthy 2.6 percent this year. Because European countries do
most of their trade with each other, Europe's economy is relatively
independent of US trends.
"At present there are no convincing signs that the slowdown in
the US economy is having significant and lasting spillover effects
on the euro-area economy as a whole," Wim Duisenberg, president of
the European Central Bank, told the European Parliament last week. …