HONG KONG, Sept 25 (Reuters) U.S. consumption demand is being crimped by the subprime mortgage crisis and this in turn could hurt Asian growth, Morgan Stanley's Asia Chairman Stephen Roach said on Tuesday.
''Courtesy of subprime, the mortgage refinancing business has changed overnight and consumer home owners are having a difficult time extracting wealth from their assets,'' Roach told a luncheon gathering.
''The days of open ended consumption are over. We are moving into a period of slower consumption growth,'' he said.
''If the world's biggest consumer slows down that does spell tougher growth prospects for Asia.'' Roach's comments follow a day after the International Monetary Fund said the impact of the credit crunch will likely slow global economic expansion.
Disagreeing with the argument that Asia had decoupled from the U.S. economy, Roach said the American consumer still wielded a lot of influence.
''Asia has benefited from world growth but the U.S. consumer is still in the driver's seat and that engine is sputtering,'' he said.
Roach also predicted more declines for the U.S. dollar, which has been weakening against most Asian currencies this year.
He gave three reasons for such an outlook -- the expectation that the U.S. Federal Reserve would cut interest rates to battle recession, the waning appetite for structured products sold by the U.S. to global investors and rising trade protectionism in the United States.
Calling it a monumental policy blunder, he said that passing trade legislations against China would not solve U.S. trade deficit problem.
''You cannot fix a multilateral problem by putting pressure on a bilateral exchange rate with one country,'' he said, adding that the United States had a trade deficit with 40 of its trading partners.
REUTERS PBB RN1729