Global slowdown underway.

• Position: Economics

The U.S. and global economies are slowing, but there is no cause for alarm yet, maintains an analysis by The Conference Board, New York.

"While it is easy to attribute a slowdown either to Federal Reserve Board hikes or to high oil prices, it is likely that both have had a rather modest effect up to this point," contends Gall D. Fosler, executive vice president and chief economist of The Conference Board. "The U.S. is still extremely liquid; personal income has been revised up; and the housing market is robust. Few countries have felt it necessary for either exchange rate or domestic reasons to follow the Fed's lead in raising interest rates.

"Eventually, these economic pressures in the U.S. have political consequences in protectionist acts or combative efforts to revalue Asian currencies, neither of which solve the problem and both of which promote global instability."

The much more important force at work is a massive imbalance in global production and demand. U.S. domestic demand is solid, growing at a 3.5% annual rate, but the system is being overwhelmed by high, sustained growth in imports. This surge is not due solely to oil or textiles, but to rapid expansion in almost every product category.

The inability of the U.S. to sustain the...