Mounting concerns over the U.S. economic outlook, along with evidence of slowing in other key countries, suggest that 2008 will be a volatile and uncertain year for the global economy, according to a new report by the Manuafacturers Allliance/MAPI.
Alliance economist Cliff Waldman observes that recent housing, manufacturing, and job growth data, which indicate that the U.S. economy may have lapsed into a recession, along with the continued crisis in global credit markets, record high oil prices, and emerging global inflation, all loom as risks to the world economy. "U.S. weakness has a negative impact on the export prospects of many key countries that depend on external demand for growth," Waldman said.
At present, exports may, however, provide a bit of good news for the United States. During 2008 the positive impact of dollar depreciation is expected to partially offset the negative impact of slower growth. The report projects a rise in the annual growth of total U.S. goods and services exports, from 7.7% during 2007 to 8.7% during 2008, and to 9.2% in 2009.
Growth in non-U.S. industrialized countries, which include Canada, the Eurozone (plus Denmark, the United Kingdom, and Sweden), and Japan, is expected to slow from 2.4% on a compound annualized basis during the fourth quarter of 2007 to 2.2% during the first quarter of 2008 and then 1.9% for the balance of 2008. Subsequently, catalyzed by an expected improvement in the U.S. economic outlook, non-U.S. industrialized country growth is projected to accelerate to 2% for the first half of 2009 and then to 2.2% during the second half, according to the report.
Due to expected slowdowns in China, India, and Mexico, cumulative developing country growth is expected to slow from an estimated 5.4% during the fourth quarter of 2007 and first half of 2008 to 5.3% during the second half of 2008. Further declines are anticipated in 2009, with growth slowing to 5.2% in the first half, 5.1% during the third quarter of 2009, and then 5% during the fourth quarter of 2009.
MAPI predicts that the dollar adjustment will likely continue throughout 2008. Waldman predicts that the dollar will decline by 8% on a compound annual basis against the currencies of industrialized trading partners during the first quarter of 2008 and then by 5% during each of the subsequent three quarters. Against the currencies of the developing countries, MAPI forecasts a decline of 6% during the first quarter of 2008, 10% during each of the middle two quarters, and then 5% during the fourth quarter.