Share prices on most of the world’s important stockmarkets have fluctuated wildly in recent weeks, but they have done so around a relentlessly downward trend, says The Economist in today’s lead editorial. America’s stockmarkets have led the retreat. In the past two weeks alone, the Dow Jones Industrial Average has lost 14.5% of its value, the Standard & Poor’s 500 index almost as much and NASDAQ has lost 8.9%.

This has wiped a staggering $1.4 trillion off share values according to one calculation. Recoveries in share prices have been short-lived, and this is turning into the longest bear market for many years.

So far, the American economy—perhaps more than ever the locomotive of global growth—has shrugged off the plunge in the equity markets. Last week, Alan Greenspan, chairman of the Federal Reserve said the recovery, albeit modest, was still on track. But can it remain immune to a continually sliding stockmarket?

So far most of the data about America’s economy have been encouraging. But the persistently gloomy mood of the markets has prompted some economists to question whether the bear market could derail recovery.

This debate ensures that each new set of economic statistics will be scrutinized even more carefully than usual. On Thursday, durable-goods orders for June will be released, along with figures for existing and new homes sales. On the following day comes the University of Michigan’s widely-respected survey of consumer confidence.

All these figures should show whether consumers – until now the mainstay of America’s economy both during last year’s recession and since – are beginning to lose their nerve.

The American addiction to shopping has the economy well. But it would be hard to find an economist prepared to argue that the share-price slide will have no impact on consumption and thus on the economy. How big that impact will be and when it will be felt is far more difficult to assess. Glenn Hubbard, the chairman of President George Bush’s Council of Economic Advisers, said last week that the drop in American share prices since May might reduce economic growth by 0.4% to 0.7% over the next year.

Hubbard was using a rough rule of thumb, no more. Most economists assume that prolonged falls in share prices have a “wealth effect.” As people see the value of their shareholdings fall, they feel poorer and curb their spending. But at what point they start to feel poorer, and by how much they cut consumption, has never been easy to measure or predict.

It could take quite a long time for people to decide that the paper losses on their investments will not soon be recovered. And although shareholding in America is widespread, most people have relatively small holdings (in 1998, the median household share ownership was less than $20,000).

Rich people own most shares, and precisely because they are rich (and already have most of what they want) they have less marginal propensity to consume than those who have less. And whatever the rich do spend represents a much smaller proportion of their overall wealth or income.