Rich countries on the brink

By BBC News Online's James Arnold

Another day, another wave of bleak economic news.

In Asia, Japan's trade surplus has fallen by one-third, battered down by a collapse in exports.

In Europe, the German economy - the motor of the continent's growth - has started to shrink, taking the country within a hair's breadth of an out-and-out recession.

And in the UK, growth figures have been revised down again, taking the overall figure to a below trend rate of 2.1%.

All this came just days after the Organisation for Economic Cooperation and Development (OECD) calculated that rich economies as a whole were contracting for the first time in 20 years.

So just how worried should we be about the global economy?

Old news

On the face of it, there is nothing much new - and nothing too alarming - about the latest spate of statistics.

The fact that Japan's economy is slumping, Germany's stagnating and Britain's past its best is scarcely a surprise.

Even at the end of last year, it was clear that the era of rampant growth, and bullish stock markets, was approaching an end - the only questions were when, and how messily.

Manufacturing, the venerable core of many rich world economies, has been visibly suffering for years.

And it does not take an economics PhD to figure out that the 11 September attacks, striking at the heart of corporate America, were likely to exacerbate the existing difficulties.

Optimists can also take comfort from the fact that an actual recession - pedantically defined as two successive quarters of negative growth - is far from being a reality outside a few of the most troubled economies.

Consumer slump

But the devil is in the details.

A manufacturing slump may be nothing new, but what really drives rich economies is consumers' confidence, and their resulting willingness to splash their money around.

So far, those consumers have proved remarkably resilient: even in crisis-battered Japan, spending growth has tended to outpace that of the economy as a whole.

But the latest slew of figures show a marked turn for the worse in this crucial area.

In its latest monthly report, the Bank of Japan revealed that consumer spending had ground to a halt for the first time in years.

And in the UK and Germany, the latest figures show that consumer spending growth, while still in positive territory, has slowed dramatically.

Deep unease

Unfortunately, this cannot be attributed to the shocking, but temporary, moral effect of the 11 September attacks.

In the weeks immediately after the attacks, spending barely dipped, at least in non-US markets.

Instead, the slowdown represents more ingrained trends.

In Japan, shoppers have been dissuaded by deflation, which makes it senseless to buy a product now that will be cheaper in the future.

In the UK and especially Germany, a wave of recent job losses seems to have undermined confidence.

And since these factors will not be reversed any time soon, the spending drought might prove prolonged - with a predictably disastrous effect on the firms that underpin rich service-oriented economies.

Different strokes

But the effects will be far from uniform.

To paraphrase Tolstoy: all happy families are alike; every unhappy family is unhappy in its own way.

As economies around the world are hit simultaneously by the global slowdown, their various strengths and weaknesses will rise to the surface.

The best bet in the current mess looks like being the UK.

Although once-lively economic growth is certainly slowing, few expect it to dip much further: the OECD predicts that it should manage 2% next year - scarcely a stellar performance, but far better than most industrialised countries.

That is at least partly because Britain had such a rough economic time 10 years ago, when companies sacked staff in their hundreds of thousands.

Fresh start

Britain's swift and brutal blood-letting allowed the economy to start more or less from scratch in the mid-1990s, essentially shifting over millions of jobs from the old economy to shiny new sectors such as telecoms and technology.

Now, the British economy is reckoned to be a leaner, more responsive machine, enjoying relatively high employment but with the sort of flexibility needed to ride out a downturn.

In Germany and Japan, meanwhile, companies and governments have long resisted mass lay-offs, something that has left them looking somewhat flabby.

Attracting fresh investment into Germany and Japan is made tricky by labour legislation, which aims to safeguard jobs, but in many cases only results in scaring companies.

Ironically, both countries now have higher unemployment rates than Britain.

Work matters

Forget abstruse measures of economic performance - budget deficits, money supply, bond yields and so on.

When a recession looms, only one thing counts for most consumers - their jobs.

In Germany and Japan at least, many of those jobs are looking shakier than ever.