Down Angle Symbol A symbol in the form of an angle pointing downwards. The US economy has outpaced the growth of its G7 competitors. Brendan Smialowski/Getty Images
- Calls for a recession in the US are still on the agenda, but the economy is still growing faster than other rich countries.
- U.S. GDP grew a surprise 3.3% in the fourth quarter, beating estimates of 2.0%.
- The forecasts for the G7 countries show slower growth and higher inflation compared to the USA.
Some Wall Street players still expect the U.S. to slip into recession this year, but the latest data shows not only that economic growth has not yet stalled, but also that the country is doing better goes as his richest ally.
The Bureau of Economic Analysis said last week that real GDP reached a surprise-high annual rate of 3.3% in the fourth quarter, beating consensus expectations of 2.0%.
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That has pushed back the narrative of an imminent downturn and also outpaced the growth of its peers in the Group of Seven, which together make up some of the world's richest nations.
The trend has held steady in recent years, with the US leading the way in economic growth since the pandemic. According to seasonally adjusted figures from the OECD, US GDP has grown by a total of 7.4% since the fourth quarter of 2019.
Canada and Italy recorded cumulative growth of 3-4% over the period, while Japan, the United Kingdom, France and Germany grew by 2.4%, 1.8%, 1.8% and 0.3%, respectively.
Among countries using the euro, combined GDP grew 0.1% on an annual basis in the third quarter of 2023.
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According to BEA, U.S. GDP growth reflected rising consumer spending, state and local government spending, and exports, among other things. And despite lower job growth compared to 2022, the number of wage and salary earners increased by 2.7 million in 2023.
“Better-than-expected consumer spending was the primary reason for the strong pace of growth in the fourth quarter of last year,” Russell Price, chief economist at Ameriprise, told Business Insider. “While we expect some slowing this year, we believe consumers are generally in good shape to continue to drive a solid pace of growth through 2024 and potentially beyond.”
In his view, consumer strength, as well as consumers' relatively low debt burdens and remaining pandemic stimulus and savings, bode well for the United States.
That's when the International Monetary Fund raised its global growth forecast for the year to 3.1% from 2.9% in a report released Tuesday, largely due to better-than-expected U.S. expansion. IMF economists expect U.S. GDP to grow 2.1% annually in 2024, more than twice as much as forecast for all other G7 members.
Still, the U.S. economic outlook ranges from a soft landing and calls for a shallow recession to more severe, year-round downturns.
There are also promising inflation developments in the USA. Government data released earlier this month showed the consumer price index rose 3.4% annually in December. That figure is down from the decade high in 2022, but is still above the Federal Reserve's 2 percent target.
According to the latest available data on the cohort, inflation remains highest in France and the UK at 4.1% and 4% respectively.
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As for monetary policy, it is uncertain when the Fed will begin cutting interest rates. However, markets have priced in five cuts for the year, an optimism partly reflected in January's strong stock market rally.
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