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Growth in the USA, can it save the rest of us?

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The outlook for the global economy is worsening according to the International Monetary Fund. The IMF downgraded its global growth forecast for 2014 from 3.4 percent to 3.3 percent, sparking a sell-off in the financial markets last week. Bob Johnson, Director of Economic Analysis at Morningstar Research, puts the IMF’s recent downgrade in perspective and provides insight into how this reduction affects the US economy in particular.
Johnson notes that the reduction from 3.4 percent to 3.3 percent may appear small, but signals a larger problem of stagnant growth. In 2013 the world economy grew at the same level, 3.3 percent. Japan and Brazil accounted for the majority of the forecast reductions, down 1 percent and 0.7 percent respectively for 2014. These reductions were off-set in part by an improving US economy. The previous forecast for the US was revised up by 0.5 percent. This revision echoes the sentiments Christine Lagarde, Managing Director of the IMF, stated in a TV interview.
Lagarde specified the US economy was definitely, “one of the bright spots” in the global economy. She cautioned though that every country must begin investing in infrastructure; monetary policies alone cannot fill the void created by the 2008 recession. For these reasons, Lagarde supported the IMF’s downgrading of the global economy given the current unemployment rate and geo-political conflicts in various countries.
Johnson puts the IMF’s worsening economic forecast in perspective stating the US is not as exposed to the global marketplace as other developed countries. Although exposure has been increasing, current levels remain around 13 percent compared to other countries whose export rates account for 25 percent of GDP. He continues to say that the struggling global economy may delay the introduction of the Federal Reserve’s interest rate hike as the IMF also revised down its forecast for economic growth in 2015 from 4 percent to 3.8 percent.