U.S. Recession Will Drag Down World Economy, Forecaster Says
By Reed V. Landberg
London, Sept. 24 (Bloomberg) -- The U.S. probably entered recession in the third quarter, dragging down world economic growth, an economic forecaster said.
The world's biggest economy probably will shrink at an annual 2.9 percent rate in the three months ending Sept. 30 and by 1.6 percent in the fourth quarter, according to the London-based Centre for Economics and Business Research said. World growth probably will slow to 0.8 percent this year from 4 percent in 2000.
The figures add to pressure on the world's central banks to trim borrowing costs again to spur growth. The U.S. Federal Reserve, the European Central Bank and other central banks all lowered rates this week, after terrorists attacks in the U.S. the week before hurt consumer confidence and caused stocks to fall around the world.
``The world economy has been dealt a blow that will depress world growth for at least the next nine months and possibly for longer,'' said Douglas McWilliams, head of the research group.
CEBR's latest quarterly forecasts were revised down from June's estimates, when the group expected world growth of 1.6 percent this year. McWilliams now expects that pace won't be achieved until next year, which he previously estimated would grow 2.6 percent.
In the U.K., the government probably will estimate the economy's growth rate slowed to 2 percent this year from 3.1 percent last year, CEBR said. CEBR, which estimates U.K. gross domestic product differently than the government, puts U.K. growth at 2.2 percent this year and 3.2 percent last year.
Next year, CEBR said growth will pick up to 1.3 percent in Britain by the government's measure and 1.8 percent by its own measure.
CEBR estimates the Bank of England will reduce its benchmark lending rate to 3.5 percent in the second quarter of next year from 4.75 percent currently. The key rate will average 5.2 percent this year and 3.8 percent next year, CEBR said.
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