Sometimes the most telling event is the one that did not happen. The lack of any global contagion from the US economy’s weak growth path over the past year has confounded analysts conditioned to consider the US as the sole engine of the world economy. That continued single-minded obsession with the US economic trajectory has led many investors to prematurely bail on the bull run — the sharp but short-lived sell-off triggered by convulsions in the US housing market earlier this year being a case in point. For them, it was unimaginable that global growth could power ahead when the US has been expanding at an annual rate of just 2 per cent, as has been the case for the past five quarters.

But a new world order has been in the making, defined by China’s growth surge and a European economic renaissance. At just under $3 trillion, the Chinese economy in nominal terms is still less than a quarter the size of the US economy. But with a pace of expansion now more than four times that of the US, China is incrementally adding more to global growth than the US is.

The even bigger surprise is the German-led revival of Europe’s economy. Last year the euro zone grew by 2.6 per cent, spurred by a 3 per cent rise in Germany. An intense focus on increasing productivity has helped Germany’s export sector become highly competitive, and it is now benefiting from booming demand in emerging markets. With projected growth for 2007 in the 2.5 to 3.0 per cent corridor, Euroland will likely outperform the US economy for the first time in recent history.

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