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Weak US economy hits global confidence

Global economic growth is expected to weaken over the rest of the year with all eyes on a still-weak US economy, according to a new report.

Northern Bank's latest global scenarios report showed there was a low risk of the world's economy falling back into recession - but that there was concern among investors and policy makers that growth would fall below trend.

Angela McGowan, the bank's chief economist, said a series of disappointing economic developments, particularly in the US, had led to a fall in expectations of global growth.

"There have been a lot of signs of slowdown over the past quarter, particularly in the US and to a certain extent in Asia," she said.

"Focus in the next quarter will probably continue to be on the US where the economy is expected to balance on a knife's edge between recovery and another downturn.

"While double-dip fears for the US are likely to be an ongoing theme for some time, the most probable scenario is that the US will simply experience below-par growth until 2011."

The report pinpoints growth at around 4.1%, down 0.4% on the bank's last report in June. Weak employment growth in the US, the decline of other leading indicators in its economy and weak data on the US housing market all contributed.

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Northern Bank forecasts year-on-year growth in 2010 will be 2.6% in the US, 1.7% in Europe, 3.1% in Japan and 9.9% in China.

The report was more positive on the eurozone. However, a spokesman added: "Southern Europe and Ireland are expected to continue being a major drag on euroland, as the lingering effects of housing bubbles and massive fiscal tightening will keep these economies in crisis for several years."