WASHINGTON — From the United States to Europe and even to booming China, the global economy is showing signs of strain.
Most major economies are expected to keep growing. But evidence is mounting that many around the world are struggling to expand as fast as they did last year.
In China, interest-rate hikes designed to reduce inflation are slowing growth. European governments are struggling with debts and squeezing budgets. Britain’s economy scarcely grew at the start of the year.
High unemployment, depressed real estate and still- high oil prices are slowing the U.S. economy, which grew at a 1.8 percent annual rate from January through March. Even Europe’s strongest economy, Germany, faces a slowdown. And after its earthquake and nuclear crisis, Japan has sunk back into a recession.
Overall, the world economy will likely grow 3.5 percent this year, down from 4.1 percent in 2010, according to the research firm IHS Global Insight. IHS has cut that forecast from 3.8 percent.
As leaders of the Group of Eight wealthiest democracies meet in Paris this week, slowing global growth is on an agenda already packed with concerns about instability in the Middle East, Greece’s debt crisis and who will be the next head of the International Monetary Fund. It isn’t a priority item at the meeting, though.
“The euro zone is a big mess, and the Europeans don’t want to talk about it,” said Simon Johnson, a former chief economist of the IMF.
Financial markets have been signaling concerns about a worldwide slowdown. The Dow Jones industrial average has shed 450 points, or 3.5 percent, this month. Stocks have slid 3 percent or more this month in Japan, Britain and Hong Kong.
“Three head winds” blowing against growth
Nariman Behravesh, chief economist for research firm IHS Global Insight, said “three head winds are hitting the global economy at the same time”:
High commodities prices.
Higher oil prices have squeezed household budgets in the United States and other rich countries and held back consumer spending. Rising food prices are hurting the middle class and the poor around the world.
Government budget cuts.
Many European countries had to slash spending after the financial crisis swelled their budget deficits. Britain last year cut spending and raised taxes, choking the economy.
Japan’s earthquake and nuclear crisis.
After factory production was disrupted, the economy shrank at a 3.7 percent annual pace in the first quarter. It will likely contract at the same rate in the April-June quarter.
