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By Knight Kiplinger

The Kiplinger Washington Editors

July 3, 2008

The largest U.S. banks are hurting badly, and the pain is starting to spread. Most small and midsize banks are still ready to lend to businesses, but they're getting nervous. This week's Kiplinger Letter examines the outlook.

ALSO IN THIS ISSUE: Jobs, Employer Health Costs, Estate Taxes, Retail Retrenching, Legal Trends, Infrastructure Spending

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The Rising Power of the Global Consumer

The American consumer -- long the engine of U.S. economic growth -- may be running out of steam. But new shoppers in the developing world will keep American business humming.

Worth Reading: The Quick Take from Kiplinger

June 2007

Joseph Quinlan

Bank of America, Global Wealth and Investment Management

Joseph Quinlan, a managing director and the chief market strategist of Bank of America, Global Wealth and Investment Management, joined the firm in June 2003. Quinlan is a leading expert on global capital flows and the transatlantic economy. He has been a senior transatlantic fellow (nonresident) at The German Marshall Fund in Brussels, Belgium, since 2003. His research there centers on regional and global trade and investment flows. As a fellow, he regularly briefs congressional leaders on global economic/financial affairs and has testified before the European Parliament.

There is considerable hand-wringing going on among analysts and economists over just when American consumers will start cutting back and how many points fewer trips to the mall might shave off gross domestic product. But they may be fretting more than necessary. Globalization, blamed for so much by so many, could be coming to the rescue -- at least for U.S. companies willing to explore these emerging markets.

Joseph Quinlan, chief market strategist of global wealth and investment management at Bank of America, sees economic salvation in South America, Asia and the once economically sleepy central Europe. As economies boom in India , Vietnam, Poland and elsewhere, the new consumer classes are snatching up cell phones, buying cars and shopping at new malls on the weekend. "That the world pivots around the U.S. consumer is an outdated, misguided and U.S.-centric view of the world," Quinlan writes. "Thanks to a variety of factors -- rising per capita incomes, budding middle classes, abundant savings, stronger employment growth, higher private capital investment -- the developing nations are becoming a much more powerful force when it comes to global imports."

This is good news for U.S. exporters and helpful to smaller businesses wondering whether and how aggressively to start marketing overseas. American brands are extremely popular overseas, and growth in exports could offset a buying slowdown here. The shift could also alter attitudes about U.S. trade policy, bolstering the hand of pro-traders and blunting efforts by labor and some industries to take a more protectionist stance.

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