Economy slowing worldwide

Economic trouble has spread far beyond the United States to major countries in Europe and Asia, threatening American businesses with the loss of foreign sales and investment that have become increasingly vital to their sustenance.

Only a few months ago, some economists still offered hope that robust expansion could continue in much of the world even as the U.S. economy slowed. Foreign investment was expected to keep replenishing American banks still bleeding from their disastrous bets on real estate and to provide money for companies looking to expand. Overseas demand for American goods and services was supposed to continue compensating for waning demand in the States.

Now, high energy prices, financial systems crippled by fear, and the decline of trading partners have combined to choke growth in many major economies. The International Monetary Fund (IMF) expects global growth to slow significantly through the end of this year, dipping to 4.1 percent from 5 percent in 2007.

All this means that economic troubles in the United States could intensify into the presidential election season and beyond. It could also make it harder for financial companies and the government-backed mortgage giants Fannie Mae and Freddie Mac to attract capital from abroad.

As the United States and many other large economies slip in unison, the reality of integrated markets is being underscored: just as globalization spreads prosperity — linking cotton farmers in Texas to textile mills in China — the same forces spread hurt when times go bad.

Many other major economies are either stagnant or shrinking as well. Japan, whose fortunes are tethered to exports, saw its economy contract at a 2.4 percent annual rate from April through June after accounting for inflation. Germany, another export power, slid at a 2 percent clip. France and Italy slipped slightly.

Spain and the United Kingdom — both grappling with hangovers from their own real-estate binges — were both flat amid talk that they have already slipped into recession. Even China and India, whose swift growth has occasioned talk of a new global order, have been cooling in recent months, though still expanding at rates that would bring envy in nearly any other land.

There is a potentially significant upside to the downturn under way: it could knock down rising prices for food and energy, which have been driven higher by swelling demand in a swiftly expanding world economy.

The chairman of the Federal Reserve, Ben Bernanke, has been betting on that very scenario as he has rejected calls for higher interest rates to suffocate inflation.

Still, concern centers on the possibility that slowing global growth could hurt sales of American goods and services overseas. Exports have been a conspicuous bright spot in an economy colored by falling home prices and declining consumer spending.

The dollar has been strengthening against many currencies in recent weeks — not because of a newfound belief in American prospects, economists say, but because investors are edging out of markets that are weakening, like Britain and other parts of Europe, sending down the pound and the euro.

"It's the rest of the world going down, not the United States going up," said Kenneth Rogoff, a former chief economist at the IMF now at Harvard.