World economic growth is slowing dramatically as recessions in the United States, parts of Western Europe and Japan take hold. The U.S. Federal Reserve - the nation's central bank - reported Monday that manufacturing output in the United States fell by 1.4 percent in November. Auto production was down nearly three percent. It was the third monthly decline in manufacturing in the past four months. Some economists warn that global economic growth may slow to less than one percent next year.
Massachusetts Institute of Technology professor Simon Johnson, a former chief economist at the International Monetary Fund, says world economic growth is likely to be no more than nine-tenths of one percent next year. That would be a sharp markdown from the 2.2 percent growth the IMF forecast last month. Even that figure had been revised downward by one percent from July.
The slowing global economy is prompting the International Monetary Fund to produce yet another forecast, which should be ready by late January.
Financial markets were unsettled Monday amid uncertainty about U.S. government assistance to the domestic auto industry.
Mark Zandi with the research firm Moody's Economy.com says that while the Bush administration has indicated a short-term bailout is forthcoming, the details are unknown. Zandi says even if $14 billion were provided to Detroit carmakers, the long-term viability of the U.S. industry is not assured.
"They're going to need more money next year even to be able to execute the restructuring plans they unveiled recently," he said. "But it's going to be tough to execute because they've got a lot of stakeholders. I think it is even odds that they make it through and get the restructuring done."
Zandi says it would be disastrous if one of the "Big Three" car companies - General Motors, Ford and Chrysler - were to go bankrupt in today's economy. He says that would trigger the loss of 2.5 million jobs. Since the U.S. recession began one year ago, the economy has lost 2.7 million jobs. America's unemployment rate now stands at 6.7 percent.