(March 15 – 11:00 ET) – The global economy is feeling the sting of the U.S. slowdown, according to a new report from the economists of Bank of Nova Scotia.

Scotia says the growth prospects for Canada, Europe and Asia/Pacific are being scaled back in the wake of the intensifying slowdown in the U.S. and spreading stock market weakness. “America’s high pressure economic expansion has rapidly decompressed over the winter,” says Warren Jestin, Scotiabank’s chief economist.

“Even with a gradual revival expected to get under way this fall, the U.S. is expected to generate GDP growth of only 1.5% this year — its weakest performance in a decade and less than one-third the pace of the previous three years.”

Scotia is calling for a U-shaped recovery, rather than a than V-shaped bounce. “Plunging confidence suggests that Americans will remain cautious shoppers in the wake of reduced job opportunities, the exhaustion of pent-up demand and persistent stock market volatility. The compression of sales and profit margins has pulled pre-tax earnings below year-earlier levels in the business sector..”

With 85% of exports going to the U.S., Canada is taking a hit too. The slowdown in Canadian activity that began in the closing months of 2000 will continue through the first half of the year, as manufacturers scale back production and hiring in response to weaker U.S. sales. “As a result, Canadian growth is likely to move down toward 2%, the softest performance since 1996,” says Jestin.

Energy will be fueling Canada’s economic progress with offshore oil and gas activity in Atlantic Canada and oil & natural gas development in B.C., Alberta and Saskatchewan. Quebec and Ontario are feeling the impact of the U.S. slowdown.

Interest rate reductions in Europe will be smaller than in the U.S., reflecting concern about inflation, more optimism about growth prospects and greater emphasis on tax reductions. On the other hand, Japan has little room for additional stimulus, with interest rates close to zero and the fiscal balance in massive deficit.

A moderate slowdown is underway in the euro zone, though the region will outperform North America for the first time in a decade. In Latin America, Brazil leads where growth is estimated to rise 4.5%-5% this yea. Latin America’s overall output growth is expected to average 4% through 2002 based on extensive economic restructuring combined with declining international borrowing costs.

Asia is experiencing a tech-led slowdown, and it continues to take a toll on Korea and Taiwan. Large investments, however, will keep China at the top of the globe’s growth ladder.