By late spring of this year, the debate regarding the prospects for the global economy revolved around whether the US economy would enter a recovery from the fourth quarter of this year. It is probably fair to say the majority view at that time took the relatively optimistic position that the economic slowdown would be shallow and short-lived.

However, the economic data that emerged over the summer months have led analysts and financial commentators to jettison this optimistic assessment of global economic trends.

Over summer, the pace of decline in the tech sector has accelerated and the leaders of the big technology companies now do not expect any upturn in their industry until the second quarter of 2002. This has meant that job cutting is now the order of the day across the industry and the Irish technology sector is clearly not immune.

For the second half of the year a significant contraction in employment in technology and telecommunications is now a certainty across the globe. It is also highly likely that technology operations located in Ireland will bear their fair share of these cutbacks.

Of course, the telecoms and tech sectors both in Ireland and abroad account for a relatively small proportion of total employment. Although this is undoubtedly the case, these sectors have been at the cutting edge of the 1990s boom. Therefore, the impact of this ongoing retrenchment across the sector can be expected to have a much greater impact then its statistical weighting in total employment.

Furthermore, the global economic slowdown is far more broad-based and is clearly not confined to technology. All of the US manufacturing sector is suffering from a sharp slowdown. The European economy has slowed quite sharply and it is not just the "new economy" sectors that are suffering, with chemicals and car manufacturers reporting a sharp slowdown in sales and profits over the summer and unemployment in Germany and France beginning to climb from quite a high base.

Likewise the UK economy has witnessed a sharp contraction in its manufacturing sector and, like the US, continues to rely on buoyant consumer demand to maintain some forward momentum. With Japan seemingly sliding back into recession, all of the major global economic blocs are now exhibiting below par economic growth.

Over the summer, investors in stock markets have reacted predictably to this mounting evidence of a widespread global slowdown.

Since the end of June, most stock markets have declined sharply. The Nasdaq has fallen by approximately 11 per cent over this period while, in the Far East, the Nikkei225 has declined by over 11 per cent. The ISEQ is down by 8 per cent so far this quarter and the FTSE 100 is down by approximately 5 per cent.

However, there is some silver lining to the storm clouds. Throughout the boom years inflation remained very well-behaved and now that growth has slowed sharply, inflation is likely to fall to very low levels. The only central bank that seems to be concerned about price pressures is the ECB. However, recent price data have shown that the rate of consumer price inflation in Europe has fallen to 2.8 per cent and is now expected to decline to the ECB's target rate of 2 per cent sometime next year.

The upshot of this is that the autumn is likely to bring a further round of interest rate cuts in both Europe and the United States.

Central banks, excluding Japan, can cut short-term interest rates significantly from current low levels. The key factor in this respect is the absence of inflation, which means short-term interest rate in Europe and the United States could ultimately go as low as 3 per cent.

Confidence in the view that European interest rates will decline has been influenced by the apparent reversal of the strong dollar trend in recent weeks.

From the perspective of the Irish economy and stock market this could prove to be a double-edged sword. The weak euro has been a key factor in Irish competitiveness, particularly given the importance of British and US markets to Irish international trade.

If the euro were to strengthen sharply versus the dollar and sterling, it would act to reduce Ireland's international competitive position. Coming during a period when Irish wage rates are rising sharply, such a currency appreciation could seriously exacerbate an already slowing economy.

With so many economic cross-currents, caution is likely to remain the byword for most investors. The bottom to the current global slowdown is not yet in sight. However, if central banks in Europe and the US aggressively cut interest rates in the autumn, investing in equities in coming months could eventually prove to be a clever investment stratagem.