Global Impact of U.S. Slowdown

Economic reports from Asia and Europe released today highlighted the damage a U.S. recession could do to exporting nations, and "raised questions about the extent to which China and other fast-developers can fill the void," according to a news analysis from Reuters.

"Japanese trade data for March illustrated both sides of that story, and business surveys in Europe suggested [that] manufacturers may be heading for a period of weaker global demand, with the euro's strength making it even harder to compete on price."

Japanese exports rose 2.3% in March compared with March 2007, Reuters said, but exports of cars and other goods to the U.S. fell 11%, data from the country's finance ministry showed.
Exports to China and Asia rose broadly, but the rise was the smallest in three years, the ministry said.

The smaller rise in exports "provided little comfort to those who argue or hope that fast-growing emerging-market economies will make up for at least a significant part of lost export demand" from the U.S., Reuters noted.

In Europe, business surveys showed that new manufacturing orders, including export orders, shrank in the euro zone for the first time in three years, Reuters noted. It cited a drop to 50.8 in April from 52.0 in March for the RBC/NTC Eurozone Purchasing Managers Index for the manufacturing sector, its lowest since August 2005, while the gauges for new orders fell below 50, signalling contraction.

However, a similar index for the services sector, which accounts for a larger share of total economic activity in developed economies, registered an acceleration in the pace of activity growth in April, Reuters said.

"The overall softening in economic activity in the euro zone is still very gradual," one economist said.

Polls conducted by Reuters and published on Wednesday showed economists are lowering their growth forecasts and raising their inflation forecasts for most of the world's big industrialised economies.