Vocabulary practice

The Fed will try to avoid a hard landing by raising interest rates only enough to slow the economy down without putting it into recession (a soft landing).

Since the Second World War, most business cycles have lasted three to five years from peak to peak. The average duration of an expansion is 44.8 months and the average duration of a recession is 11 months. As a comparison, the Great Depression - which saw a decline in economic activity from 1929 to 1933 - lasted 43 months from peak to trough.

Chinese Finance Minister expressed confidence on Tuesday that China's economy could maintain strong growth this year despite a global economic turndown. However he admitted a world slump would affect China. "The contribution of exports to our GDP is over 40 percent, therefore the slowing down of the global economy, including the slowdown in the US economy, stagnation in Japan's economy and a slowdown of European economies is having some bearing on China's growth," he said.

In 2004, the global economy enjoyed buoyant growth on the back of economic expansion in the U.S. In 2005, however, a slowdown in the U.S., engine room of the global economy, will trigger slowdowns in Asia and the EU as well, causing growth in real GDP to fall to 3.0%. Despite this, adjustment in the U.S. economy will be moderate and not turn into a recession, and the global economy is projected to return to recovery and achieve real GDP growth of 3.3% in 2006.

There are still good reasons to expect a pickup in growth in the period ahead, and it is encouraging that the global financial system has proved remarkably resilient to the substantial shocks of the last year.

Texts to translate:

30. Losing Balance and Monentum?

The smooth scenario where the recovery was expected to spread more evenly across the OECD has not materialised. While some elements of this scenario, such as a relatively successful soft landing in the United States and a rebound of activity in Japan may be in place, what is badly lacking is sustained momentum in the euro area. Indeed, as time passes it is becoming increasingly evident that circumstantial arguments (Iraq war, oil and commodity price shocks, exchange rate fluctuations) are not sufficient to explain the string of aborted recoveries in Continental Europe. As a result, and looking ahead, growth prospects seem bound to differ widely across the OECD and the world economy, ranging from solid in Asia to back on trend in the United States, and weak and uncertain in Europe. Such contrasting economic perspectives will not contribute to reducing current account imbalances and may be reflected in slower aggregate world demand. These growth outcomes are not carved in stone, however: as always, they are contingent on the effectiveness of macroeconomic and structural policies and their capacity to adapt to a more globalised environment.

In the United States the economy is likely to continue to grow in line with potential. Several years into the recovery, activity is still largely driven by domestic demand, with little help yet in sight from net exports. Notwithstanding a somewhat accidental fall in imports during the first quarter of the year, the contribution of net exports to growth has indeed been rather weak despite a substantial depreciation of the real effective exchange rate of the dollar.

In Continental Europe, after an encouraging upswing during the first half of 2004, growth weakened in the second half of last year, in parallel with sagging consumer and business confidence. Although on the surface recorded growth picked up somewhat in early 2005, it is flagging anew and no decisive upturn is in the offing before late this year. This abrupt weakening stems in large part from a stronger euro and higher oil prices. But it has been considerably amplified in countries such as Italy and Germany by a distinct and recurrent lack of resilience to outside shocks, in contrast with smaller economies such as Spain and the Nordic countries, which have held out well. The euro area's susceptibility to shocks makes short-term forecasting a highly contingent exercise: for a gradual recovery to materialise, as expected in this Outlook, a modicum of external stability will be needed for some time.