Why the US economy is doing so much better than the rest of the world
It happened again — the US economy defied yet another forecast in a big way.
Economists were convinced the last quarter of 2023 had to be the one where economic growth slowed significantly after the prior quarter’s gangbuster 4.9% annualized growth rate. Gross domestic product, the broadest measure of economic output, did slow last quarter to a 3.3% annualized rate. But make no mistake, as Larry David would say, that’s prettaaay, prettaaay good. It’s remarkable given economists were expecting 1.5% annualized GDP growth last quarter. It’s even more remarkable considering a year ago they were all but certain there’d be a recession by now and the economy would grow at a meager 0.2% rate.
But what’s perhaps most remarkable about the US economic growth rate is how much it towers over similarly sized advanced economies.
For instance:
- The combined GDP of the 20 countries that use the euro grew at an annualized rate of just 0.1% in the third quarter of last year
- The UK is growing at a 0.2% annualized rate, according to the latest GDP estimate from November
- Japan’s economy shrank by 2.1% in the third quarter of 2023 compared to a year prior
https://edition.cnn.com/2024/01/26/economy/us-gdp-other-countries/index.html?ref=aussienomics.com
Yes 1st quarter GDP for 2024 was less than last 1/4 2023, but....
Last quarter’s (first 1/4 2024) GDP snapped a streak of six straight quarters of at least 2% annual growth. The 1.6% rate of expansion was also the slowest since the economy actually shrank in the first and second quarters of 2022.
The economy’s gradual slowdown reflects, in large part, the much higher borrowing rates for home and auto loans, credit cards and many business loans that have resulted from the 11 interest rate hikes the Fed imposed in its drive to tame inflation.
Even so, the United States has continued to outpace the rest of the world’s advanced economies. The International Monetary Fund has projected that the world’s largest economy will grow 2.7% for all of 2024, up from 2.5% last year and more than double the growth the IMF expects this year for Germany, France, Italy, Japan, the United Kingdom and Canada.
Businesses have been pouring money into factories, warehouses and other buildings, encouraged by federal incentives to manufacture computer chips and green technology in the United States.
