The global economy fell off a cliff late last year as the credit crunch brought economic activity to a standstill, and most major economies appear to have contracted at a sharp rate in the first quarter as well, note the analysts at Wachovia Economics Group. Although recent data suggest that the bottom has probably not been reached yet, rates of decline may be starting to slow.

Eventually, however, the global economy will begin to recover. Will major economies rise from the ashes at the same time and pace, or will certain economies lead others? In our view, China will probably be the first major economy out of the gate. China did not have many of the problems that plagued other major economies, and Chinese policymakers were quick to enact expansionary macroeconomic policies.

The U.S. economy faces some formidable challenges, but it should be one of the first economies to post positive growth numbers again due to the unprecedented stimulus that has been applied. The U.K. economy, which in many respects resembles its American counterpart, should start to turn the corner as well later this year. In contrast, the Euro-zone will likely lag the United States and Great Britain due to the tepid policy response to date in continental Europe. Japan should also be one of the last major economies to emerge from the current downturn.

Our views regarding near-term trajectories of the world's major economies influence our foreign exchange rate forecasts. Specifically, we project that the U.S. dollar will strengthen versus most major currencies over the next few quarters as the United States shows signs of emerging from the downturn before most other major economies.

It is now well documented that the global economy is in the midst of its deepest recession in decades. Industrial production in the 30 countries that comprise the Organization for Economic Cooperation and Development (OECD) plunged 15 percent in January relative to the same month in 2008. Moreover, the downturns of the early 1980s and 2001 pale in comparison to the current nosedive.

With grim news on production in individual countries in February and March it is very likely that the OECD composite has slumped even further. With many economies in deep recessions at present, it may seem a bit premature to discuss recovery. However, many stock markets have posted impressive gains over the past few weeks as economic data have generally not been as bad as earlier this year.

In a recent interview, Fed Chairman Bernanke went so far as to claim that there are some green shoots of recovery in the U.S. economy that are starting to appear. Is the outlook starting to brighten? If so, will the major economies of the world, which simultaneously fell off a cliff last autumn, experience synchronous recoveries? Or will certain economies come out of the gate before others?

The deepening of trade and capital flows has made business cycles across major economies more synchronous than they were in the past. Although stronger economic activity in one major economy will likely have spillover effects on other economies, cycles are not perfectly synchronized and we expect major economies to emerge from the current downturn at varying speeds and at different times.

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