Though it may be bad manners to bask in the misfortune of others, it is now apparent that the economic crisis that began in Asia two years ago turned out to be a great tonic for the U.S. economy.

But now, with Asian economies on the mend, their gain could mean some pain here. The U.S. economy now faces the prospect of a modest slowdown as interest rates and prices for many goods inch up, forcing companies and consumers to curb their free-spending ways.

Very few people expected it to unfold this way back in the summer of 1997, after Thailand devalued its currency and ignited a firestorm that swept through Asian currency markets and nearly derailed the world financial system. At the time, many forecasters warned that Asia's slump would knock half a percentage point or more off the growth rate of the U.S. economy and some even predicted that Asia's woes would lead to a recession in America.

Quite the opposite occurred, much to the surprise of most economists and policymakers, as a combination of forces drove down interest rates and held down inflation, spurring strong U.S. economic growth.

"If you go back to late 1997, so many U.S. economists stumbled by saying the Asian crisis would cause a recession," said Mickey Levy, chief economist at Bank of America. "But because interest rates and exchange rates adjusted, it provided a boost to the domestic economy. The U.S. economy actually generated stronger growth as a result."

It worked this way: As investors pulled their money out of foreign economies, cash flowed into the U.S. bond market, lowering interest rates set by the markets. Meanwhile severe global financial turmoil last fall prompted Federal Reserve policymakers to cut the short-term interest rates they control, further lowering borrowing costs for businesses and consumers. Recessions in Asian economies depressed global demand for all kinds of goods, holding down the prices of U.S. imports. One example was the lowest inflation-adjusted oil prices in 40 years.

As a result, U.S. consumers -- flush with real wage gains, fattened stock portfolios and extra cash from refinanced mortgages -- went on a buying binge, snapping up new houses, cars, furniture and clothes.

But more recently, the superchargers of falling interest rates and oil prices have been turned off. The Fed moved last week to raise interest rates by a quarter of a percentage point and some economists predict more increases to come. Oil prices have bounced back from their 1998 lows of $11.56 a barrel and yesterday briefly surpassed $20 a barrel. The rate on the benchmark 30-year bond is up nearly 30 percent from its low of last October. And the average rate on a 30-year fixed-rate mortgage is back up above 7 percent.

So the good news abroad could mean bad news at home for consumers and investors alike. While big U.S. exporters see better times ahead as overseas markets improve for their goods, their employees probably have enjoyed the best combination of cheap credit and benign inflation they will see for a while. Mortgage refinancing activity has all but dried up as a result of the increase in interest rates, and there are some reports showing a modest slowdown in construction activity.

But the industrial economy is showing new signs of life in response to improving conditions overseas. The National Association of Purchasing Managers index measuring the state of industrial exports, for example, has risen for four consecutive months after 14 months of decline. And a recent Commerce Department report cited the brightening economic picture in Asia as the reason behind a narrowing of the trade deficit. Commerce boosted its estimate of U.S. exports while reducing its calculation of the value of imports coming into the country.

"There's far more interest from Asia," said Norbert Ore, a purchasing executive with Richmond-based paper maker Chesapeake Corp., who directs the purchasing managers' survey. "One of our panel members is a golf cart manufacturer and said `Asia is starting to buy golf carts again.' We're seeing a good bit of strength in wood products that's not been there, and some action in textiles."

The question is which will have more impact on the U.S. economy: a slowdown in consumer spending or the boost for U.S. exporters caused by Asia's recovery? Financial markets seem split, with bond traders worried about the inflationary implications of growth and the stock markets reaching new heights on the belief that corporate profits will remain strong with growing global demand.

Economists generally think that while profits will be strong in the second quarter, overall economic growth will slow somewhat from the 4.3 percent annual rate seen in the first quarter as rising interest rates take their toll.

But the outlook remains fairly bullish because economists generally expect only a mild rebound in Asia, enough to give a lift to U.S. exporters but not enough to really stoke inflation.

"We are expecting some slowdown," said Merrill Lynch & Co. economist Gerald Cohen. "You may have less of a favorable impact on inflation in 1999 than you did in 1998, but this is being offset because we're going to have greater demand for our exports."

Cohen and other economists point out that there remains a tremendous amount of manufacturing and commodity-producing capacity in the world, even with a recovering Asia. For 1999, his firm is predicting U.S. economic growth of 4 percent, roughly the same as last year, with inflation remaining a non-issue.

One local company that felt the mixed effects of the Asian crisis was Harman International Industries Inc., whose products include the $10 plastic outdoor speakers popular among working-class Chinese and $20,000 stereo amplifiers once highly favored by Japanese yuppies. Harman's fast-growing Asian export business got clobbered, but it enjoyed lower prices for the imported parts it uses to make some of the lower-priced products bought by U.S. consumers.

For example, the speakers Harman produces for personal computer makers such as Dell Computer Corp. fell in price as Harman found itself paying less for the imported components. These savings didn't help boost Harman's profits, though, as the company's competitors reaped the same savings.

"Component prices came down significantly," said Frank Meredith, Harman's chief financial officer. "That became a plus for the U.S. consumer."

But now as Asia recovers, and prices for many goods begin a slow rise, those benefits are ebbing and the U.S. consumer may have to give back some of the gains from Asia's two years of economic misery.

CAPTION: (This graphic was not available) The Asia Coolant