MAPI Says Global Economy Still Fragile

ARLINGTON, Va. -- The worldwide drop in manufacturing output may have reached a temporary bottom, even in countries like Japan where the industrial downturn was severe. However, the outlook for world economic growth is still in flux, according to the Manufacturers Alliance/MAPI.

MAPI economist Cliff Waldman expects that weak growth is in store for the advanced economies during 2010. Short-term prospects are mixed for key emerging market economies, depending on the degree of openness, export diversification, and ties to the U.S.

U.S. export demand will likely contract at an historic pace before seeing sluggish growth in 2010, while the U.S. dollar will resume a downward slide in 2010.

"Incoming economic and financial data indicate that the epic credit disruption, which began in the U.S. during the summer of 2007 and culminated in the near failure of the industrialized country financial system, has now largely played itself out on the world economic stage," Waldman said. "But while global stabilization is apparent, a return to sufficient and sustainable economic growth is an entirely different matter."

MAPI expects U.S. goods and services to contract 13.6 percent in 2009, matching the 1958 decline as the deepest export contraction of the post-World War II era. A modest rebound of 1.7 percent is expected during 2010.

Most advanced economies will likely see weak recoveries in gross domestic product (GDP) and in manufacturing output in 2010. GDP in non-U.S. industrialized countries, including Canada, the Eurozone, and Japan, is forecast to grow 1.5 percent in the fourth quarter of 2009. GDP growth is expected to slowly accelerate to 1.7 in the first quarter of 2010, to 1.9 percent in the second quarter, and then 2 percent in the second half of 2010.

Aggregate developing country GDP is expected to grow by 1 percent during the third quarter of 2009 and by 2 percent during the fourth quarter, and accelerate to 4 percent by the fourth quarter of 2010.

“The principal risk to the resumption of global growth is the onset of a damaging global deflation, a protracted period during which the average price level actually falls,” Waldman warned. 

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