Economists have cut their growth forecasts for the world's major economies, worried about corporate cost-cutting, a build-up of US consumer debt and the risk of war in Iraq, according to a Reuters survey.
The survey of 150 economists in the Group of Seven leading economies showed the biggest drop in growth forecasts in 2003 for Germany and Italy - both rely on the United States for export-led growth.
Economists in this month's survey forecast gross domestic product growth in the United States, adjusted for international comparisons, at 2.5 per cent this year and 2.8 percent next year, versus 2.8 and 3.6 per cent in the previous survey in July.
In a typical recession, households aim to tidy up their finances, but last year in the United States consumers spurred on by historically low interest rates went on a debt-fuelled spending spree that helped the economy start recovery.
"Household balance sheets in the United States are in a worse state now then before the recession last year," said Mr John Butler at HSBC in London.
"This debt overhang combined with corporates still trying to rebuild profits by cutting costs and jobs is going be a major constraint on consumer spending and economic growth."
The poll forecast Canada would be the fastest growing economy in the G7 in the next year, followed by the United States and Britain.
France is tipped to grow faster than Germany and Italy while Japan is still struggling to emerge from a decade of stagnation.
In the first half of next year, economists also see worries about the possibility of war between the United States and Iraq dampening consumer confidence and spending.
Consumer and business confidence in the euro zone is also sapped. Potential trend growth in the euro zone is estimated at between 2 and 2.5 per cent by the European Central Bank, but economists say lack of consumer response to rate cuts already in place is worrying.