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The United States Capitol Building is pictured in Washington, D.C., on February, 27, 2013. The International Monetary Fund boosted its growth forecast for the U.S. and cut its outlook for Germany, France, Japan, Brazil, Russia and the world as a whole.Reuters

The global economy is facing a stark reality: It's operating largely on one cylinder – the United States.

Evidence of the dual nature of the global economic engine landed this week when the International Monetary Fund boosted its growth forecast for the United States and cut its outlook for Germany, France, Japan, Brazil, Russia and the world as a whole. The IMF also warned about the rising risk of a recession in the euro zone as well as worrying geopolitical issues, noting that an "uneven global recovery continues."

All of which has raised questions about whether one country can fuel global growth and sent investors scrambling to cope with market volatility not seen in years.

Canada's benchmark S&P/TSX composite index fell 233 points Friday, its biggest drop in more than a year. This week alone, the TSX lost 3.8 per cent and it is down 9 per cent since the start of September. Meanwhile, the price of West Texas intermediate oil, the American benchmark, has fallen to $85.52 (U.S.).

"The U.S. can go it alone. It can act as an island," as it did during several periods in the 1990s, said Douglas Porter, chief economist at Bank of Montreal. However, "the bigger, tougher question is, can the U.S. lift everyone else out of the mire?"

"That's much less clear. There are serious problems out there," Mr. Porter continued, and the United States is not as big as it was, relative to other economies, compared with previous decades.

Mr. Porter outlined four reasons for global angst: the IMF downgrade, concerns over a strengthening U.S. dollar and its impact on corporate profits, slumping oil prices and growing concern over Europe, particularly Germany, the region's largest economy, which is on the brink of recession.

One question is how these cross currents will affect Canada, an economy the IMF calls "solid." Canada's economy looks healthier than that of much of the developed world, but as two economic reports issued Friday suggested, it is riding its U.S. neighbour's coattails.

The country's surprising employment surge of 74,100 jobs in September was tilted toward the export-oriented resources and manufacturing sectors. Meanwhile, the Bank of Canada's quarterly business outlook survey showed improving sales, more capacity pressures and higher investment intentions for exporting companies. But it had a much less encouraging story for companies relying on domestic business, facing stagnant demand at home.

Employment data has seesawed all year, but the underlying picture shows average wage gains are just keeping pace with inflation, while most of the employment gains are still in resource-rich provinces of Alberta and Saskatchewan. Over the past year, employment gains have risen by a still-tepid average of 13,000 per month, and all this volatility may keep a lid on further hiring.

The key issue now is whether the U.S. economy can truly thrive more or less on its own, without the help from Europe, China or Japan.

"The latest evidence suggests that the more important [U.S.] domestic economy remains healthy," said Paul Dales, senior U.S. economist at Capital Economics, in a report this week.

Germany, long the only economic light shining in the embattled euro zone, stands on the brink of recession after a rapid decline marked by a plunge in exports and industrial output.

At the same time, hopes of a Japanese resurgence have all but disappeared as a result of a weaker-than-expected recovery in business and consumer spending. And China's economic growth is slowing, which has taken a toll on resource producers such as Canada, Australia and Brazil.

Concern over Europe's recovery from the recession gained strength last month when Ford Motor Co. warned that its European operations would post a loss of about $1.2-billion (U.S.) this year, higher than originally forecast. The auto maker also said vehicle sales in Europe won't recover to pre-recession levels before the end of this decade.

The U.S. can withstand a downturn in its trading partners. That's mainly because its economy relies less on exports than other developed nations. Exports account for just 13.5 per cent of the U.S. gross domestic product, less than half of the share of the Canadian economy.

There are some bright spots. Britain's economy has turned around, as has Mexico's, which is benefiting from stronger U.S. growth, while India's outlook has improved. Weaker currencies in Canada and many emerging markets should also help make their exports more competitive. The Canadian dollar weakened to 89.15 cents (U.S.) Friday, and has fallen about 5 per cent this year.

With files from David Parkinson, Brian Milner, Carrie Tait and Greg Keenan