Months of rising crude oil prices have finally produced what economists from New York to Tokyo have feared, justifiable worries of a global economic slump. Last week two key reports triggered widespread concerns that the worldwide economic recovery could die, the Wall Street Journal reported Monday. On Friday the U.S. trade deficit reportedly widened to a record $55.82 billion in June from $46.88 billion in May, and Japan's growth plunged to an annual rate of 1.7 percent in the second quarter, mostly because of a slump in business investment, after topping 6 percent in each of the previous two quarters.
The two reports jarred financial and business leaders. "The risks that the global economy will enter an extended soft patch are rising," economists at J.P. Morgan Chase & Co. wrote in a report to clients. They estimate that world growth probably slowed sharply to a 2.7 percent annual rate in the second quarter after several quarters above 5 percent. "Growth in the rest of the world appears to be slowing," U.S. Treasury Secretary John Snow said Friday. "The price of oil is causing an economic headwind." |