Although real short-term interest rates have risen as the federal funds rate has been held unchanged while inflation expectations have declined, the financial conditions that have fostered the strength in demand are still in place. With their incomes and wealth having been on a strong upward track, American consumers remain quite upbeat.
The speed of this downturn is cause for concern, and illustrates that the idea that the emerging markets can decouple from the advanced economies and become an independent engine of global growth is overly simplistic.