Economic Outlook
The Economic Outlook Report is a publication written by Euler Hermes economists from around the globe. If, after reviewing the summary below, you are interested in receiving the report, please complete the form below to be added to the distribution list.
Global Sector Outlook - Summer 2007
The world economy is increasingly based on a duality of strong consumption in the US, with consumer prices being kept low as a result of industries relocating to low-wage countries. However, aside from significant wage austerity, this comes at the price of weak international purchasing power, limiting imports and generating huge trade surpluses. These surpluses are accumulated and often reinvested in the US, financing increasing debt in households and in the government.
This situation creates two threats for the world economy: the first concerns a decrease in consumption due to restricted bank lending, while the second involves the US public opinion, which could refocus on disadvantages for domestic producers and demand more protectionist policies from the next administration. If American import demand should temporarily dry up, the world economy would face supply-demand imbalances in the majority of sectors. The deflation in consumer goods could thus burst forth, and the revival of consumption in emerging countries would play a vital role in sustaining world growth in years to come.
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