Even as world output growth has resumed a technically healthy pace, the current challenges to the global economy are so remarkably wide and diverse that uncertainty itself has become an issue for the outlook, according to a new report.

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In the Manufacturers Alliance/MAPI Global Report—May 2011 (ER-721),economist Cliff Waldman writes that a “portfolio of unknowns” poses significant concerns to the worldwide recovery.  Among these are volatile commodity and currency markets as well as uprisings in the Middle East and the disastrous earthquake and tsunami in Japan.  While it seems unlikely that the world rebound is fundamentally at risk, the business environment over the next year or two will be volatile and tricky, requiring a persistent reevaluation of forecasts and business plans.

“The pace of the U.S. economic recovery has been far slower than that which followed the deep recessions of the 1980s and 1990s.  It has been hindered by difficulties in the housing and labor markets in addition to fiscal uncertainties at all levels of government,” Waldman said.  “Recent growth data in the Eurozone highlight the sharp dissonance between the moderate but uneven performance of the large economies in the north and the continued drag from the debt ridden economies of the southern periphery whose deep fiscal and financial troubles are now, once again, creating fears about the economic stability of the Eurozone as a whole.”

Gross domestic product (GDP)  growth in non-U.S. industrialized countries, which include Canada, the Eurozone (plus Denmark, the United Kingdom, and Sweden), and Japan, is expected to accelerate at an unusually slow pace, from 1.8 percent during the second quarter of 2011 to an average of 2 percent during the third and fourth quarters of 2011. A modest further acceleration is expected to take the pace of growth to an average of 2.1 percent during the first half of 2012 and to 2.3 percent during the second half of next year.

Aggregate developing country GDP is expected to gradually advance from 4.5 percent during the second quarter of 2011 to 5.6 percent by the fourth quarter of 2012, benefitting from some improvement in advanced economy growth as well as a more stable currency path.

Dollar fluctuations against major trading partner currencies, combined with global growth that is heavily reliant on emerging market strength, are expected to generate moderate export growth for a U.S. economy that will increasingly need buoyancy in external demand to realize a full economic expansion.

MAPI anticipates that the growth rate of total U.S. exports of goods and services will be 7 percent in 2011 before accelerating to 8.5 percent in 2012.  Annualized import growth is anticipated to be 4.9 percent in 2011 and 5.6 percent in 2012.  The growth rate differential between exports and imports, though, needs to be much wider to avoid an increase in the current account balance.  The current account deficit is expected to be $586 billion in 2011 before widening to $617 billion in 2012.

The report notes that the short-term path for the dollar will encompass a multitude of influences including uneven global demand, the path of divergent monetary policies, and industrialized economy debt concerns.

 “At least over the short term,” Waldman predicted, “we anticipate dollar volatility against major trading partner currencies and the continuation of a more fundamental decline against developing country currencies.”