In 2001 and 2002, the sharp decline in growth in the foreign countries soon after the U.S. economy slowed reflected the global nature of the bursting of the technology bubble and its worldwide transmission through equity markets and manufacturing. In the current slowdown, the implosion of the housing sector is playing the most prominent role in dragging down U.S. GDP growth.
As construction utilizes local inputs and results in an output that is not traded internationally, its spillovers abroad are more limited. To be sure, a portion of the decline in domestic demand in the United States has been absorbed by foreign economies as our imports have fallen and exports have risen.