One by one, economies around the world are stumbling. By cutting interest rates again this week—for the seventh time this year—the Federal Reserve hopes it can keep America out of recession. But in an increasing number of economies, from Japan to Taiwan to Mexico and Brazil, GDP is already shrinking. Global industrial production felt at an annual rate of 6 percent in the first half of 2001. Early estimates suggest that gross world product, as a whole, may have contracted in the second quarter, for possibly the first time in two decades. Welcome to the first global recession of the 21st century.

So far, America itself has escaped a technical recession, defined as two quarters of falling GDP. But on August 29 revised figures are expected to show that America’ s GDP growth in the second quarter was close to zero or even negative, rather than the 0. 7 percent annual rate originally announced. With GDP growing well below trend for several quarters, profits tumbling and unemployment rising, it now smells horribly like a recession.

Earlier this year, when American first sneezed, the European Central Bank (along with most private-sector economists) argued that the Euro area was insulated from America’ s slowdown and had little to worry about. This seems to have been wrong. In Germany there are fears about recession as business investment and retail sales tumble. Recent figures confirmed that Germany’ s GDP stagnated in the second quarter, Italy’ s GDP fell in the second quarter, and’ although growth has held up better in France and Spain, the growth in the Euro area as a whole was close to zero in the quarter. Nobody is forecasting an actual recession in the Euro area this year, but it is no longer expected to provide an engine for world growth.

As for Japan, it is probably already in recession. Japan’ s GDP grew slightly in the first quarter. Goldman Sachs reckons that figures could show that GDP felt at an annual rate of as much as 6 percent in the second quarter, and the contraction has almost certainly continued into the second half of the year. Persistent deflation continues to be a severe problem.