Higher gasoline prices have sapped consumer spending in the US while tighter monetary policy has curbed demand in China. Japan, the world?s third-largest economy, is struggling to right itself in the wake of a record earthquake while Europe is battling a debt crisis that claimed its third victim ? Portugal ? last week

THE global economy is cooling, in a shift that will slow, not stop, the worldwide expansion.

Growth is decelerating in the two largest economies as finance ministers and central bankers gather in Washington for the semi-annual meeting of the International Monetary Fund and World Bank starting Friday. Higher gasoline prices have sapped consumer spending in the US while tighter monetary policy has curbed demand in China. Japan, the world's third largest economy, is struggling to right itself in the wake of a record earthquake while Europe is battling a debt crisis that claimed its third victim -- Portugal -- last week.

"The headwinds we've run into are pretty strong," said David Hensley, director of global economic coordination at JPMorgan Chase & Co. in New York. "The fundamental forces driving the recovery have not been stopped. We're bending but not breaking." JPMorgan Chase sees growth of 4.2% this year, down from its 4.7% forecast in January.

The enduring expansion means that global stock markets are still a buy, even as the world economy "loses some of its acceleration," said Jim O'Neill, chairman of Goldman Sachs Asset Management in London. "The bull market in equities continues," he said. He sees the Standard & Poor's 500 Index rising to between 1,400 and 1,450 by the end of the year from yesterday's close of 1,314.52.

REALLY UNDER WAY:

The IMF argues that the rebound has become "more selfsustaining" as increasing private-sector demand replaces waning public support in promoting growth, according to its World Economic Outlook issued this week. "This is not a time for complacency, but the good news is that the recovery is really under way," IMF Managing Director Dominique Strauss-Kahn said yesterday in an interview on Bloomberg Television's "InBusiness" with Margaret Brennan. The Washington-based lender forecasts world growth of 4.4% this year and 4.5% in 2012, after 5% in 2010.

Expansion expectations nevertheless fell for a second consecutive month in April, according to a Bank of America Merrill Lynch survey of fund managers published this week. Forty-two percent of investors polled also said they see a period of below-trend growth and above-trend inflation.

In India, Asia's third-largest economy, the benchmark wholesale-price index rose 8.98 percent in March from a year earlier, the commerce ministry said today. The Reserve Bank of India last month predicted inflation would be 8% by the end of March.

ROCK AND ROLL:

The global economy is experiencing a "rock and roll recovery," said Holger Schmieding, chief economist at Joh Berenberg Gossler & Co. in London. "While occasional shocks are rocking the markets, the recovery keeps on rolling."

The oil shock did hit the US economy hard in the opening months of 2011, as prices for regular gasoline at the pump jumped to the highest since 2008. St. Louis-based Macroeconomic Advisers reckons that gross domestic product declined 0.2% in February after dropping 0.4% in January. For the quarter as whole, the economic forecasting firm foresees GDP rising at an annual rate of 1.5% after increasing 3.1% in the fourth quarter. The $38-billion deal to cut federal spending that lawmakers agreed on last week may trim economic growth, though at most by only a few tenths of a percentage point, said Nariman Behravesh, chief economist in Lexington, Massachusetts, for research group IHS. "Some of the numbers that have been bandied about are smoke and mirrors," he said.

JAPANESE EARTHQUAKE:

In Japan, GDP may shrink 3% in the April-June period, the most since the aftermath of the 2008 Lehman Brothers Holdings Inc. collapse, as power and supply-chain disruptions reduce production, according to the median of 18 estimates in a Bloomberg News survey in the past week. Growth should rebound next quarter as Prime Minister Naoto Kan's proposed 4 trillion yen ($48 billion) initial reconstruction package kick-starts a recovery, the survey shows.

Tokyo-based Shiseido Co., the country's largest cosmetics maker, said this week the quake may have reduced its sales by 3 billion yen. A Shiseido factory that makes products including shampoo was damaged by the temblor.

China's economy also may be decelerating, although, unlike in the US and Japan, that seems more by design than happenstance. GDP rose 9.7% in the first quarter from a year earlier, the statistics bureau said today, down from a 2010 peak of 11.9%.

OUT OF CONTROL:

A slowdown in the world's second-biggest economy would help address inflation that billionaire investor George Soros warned this week is "somewhat out of control" in the aftermath of a record credit boom and higher commodity prices. The People's Bank of China has raised interest rates four times and boosted banks' reserve-requirement ratios six times since early October to contain price pressures. Doubts about the euro area's economic outlook have also increased after the European Central Bank raised its benchmark interest rate last week for the first time since July 2008, threatening to compound the pain of the continent's sovereign- debt turmoil.

COMMODITY PRICES:

The moderation in global growth has taken the edge off some commodity prices. The most-active copper contract closed at $4.3035 a pound yesterday, down from a record $4.6575 on February 15, in trading on the Comex in New York. Lumber futures fell 22 percent to $266 per 1,000 board feet yesterday on the Chicago Mercantile Exchange from $340 on January 4, the highest intraday price since May 5, 2006. Bloomberg