The Manufacturing Alliance/MAPI Global Report-May 2011 is out, and the outlook for the U.S. and global economies is volatile, with one analyst suggesting another economic downturn is possible.
At the fulcrum of the global economic future is the United States, whose recovery is sketchy and is progressing in fits and starts, said Cliff Waldman, the Manufacturers Alliance/MAPI economist who wrote the report. He believes the U.S. economy will continue to limp along for the next few years with slow unemployment improvement and uneven growth.
"The economy needed to put itself back together after the 2008 recession, and it hadnt done it before other shocks to the system retarded its growth," Waldman says. "The Japan disaster had a major effect on supply chains in this country, and the upheaval in the Middle East has made a lot of people nervous about the price of petroleum."
What disturbs Waldman the most about the United States is that the policymakers in the country have few levers left to pull to pull it out of its current economic quagmire. The housing market is still falling and unemployment remains stubbornly high. Until those problems are solved, Waldman worries that the U.S. economy will continue to sputter.
"The world needs the United States market for its manufactured goods," Waldman said. "The global economy can survive with a weakened United States, but not one that has another economic disaster.
"I wouldnt rule out another downturn," Waldman said. "The possibility is there if were not careful."
On the global scene, Waldman says he sees continued strength in developing markets such as Brazil, China and India, which have seen double-digit growth over the past two years. Its those economies that are pulling the international economy through these doldrums.
Their growth is beginning to slow, but Waldman sees them as viable economic engines for the next few years. U.S. manufacturers have taken advantage of that continued growth by investing heavily in these areas.
But the gap between the developing countries and developed countries is causing problems on the monetary policy front, Waldman said.
"The dissonant paths being taken by the two parts of the world has led to disparate monetary policies that work against each other," Waldman says. "Thats caused significant currency fluctuations and is adding to the global uncertainty."