While some Wall Street players still anticipate a recession in the US this year, recent data not only indicates ongoing economic growth but also reveals the country’s outperformance compared to its wealthiest counterparts.
The Bureau of Economic Analysis reported last week that real GDP for the fourth quarter exceeded expectations, registering an annualized rate of 3.3%, surpassing the consensus forecast of 2.0%. This defied expectations of an imminent downturn and outpaced growth among its Group of Seven peers, which include some of the world’s richest nations.
This trend has persisted over recent years, with the US consistently leading in economic growth since the onset of the pandemic. According to seasonally-adjusted figures from the OECD, US GDP has expanded by a total of 7.4% since the fourth quarter of 2019.
During this period, Canada and Italy experienced cumulative growth rates of 3-4%, while Japan, the United Kingdom, France, and Germany saw growth rates of 2.4%, 1.8%, 1.8%, and 0.3%, respectively. The expansion in US GDP was propelled by increases in consumer spending, state and local government spending, and exports, among other factors, according to the BEA. Despite slower job growth compared to 2022, payroll employment rose by 2.7 million in 2023.
Russell Price, chief economist at Ameriprise, attributed the robust growth in the fourth quarter of last year primarily to better-than-expected consumer spending. He anticipates some deceleration in growth this year but believes consumers remain well-positioned to sustain solid growth through 2024 and possibly beyond.
The International Monetary Fund (IMF) raised its global growth forecast for the year from 2.9% to 3.1%, largely driven by stronger-than-expected expansion in the US. IMF economists forecast US GDP to grow at an annual rate of 2.1% in 2024, more than double its projection for all other G7 members. However, economic forecasts for the US vary from soft-landing scenarios to more severe downturns.
Inflation in the US has also shown a favorable trajectory, with the consumer price index climbing 3.4% annually in December, down from multi-decade highs in 2022 but still above the Federal Reserve’s 2% target.
Among G7 nations, inflation remains highest in France and the UK at 4.1% and 4%, respectively. As for monetary policy, the timing of interest rate adjustments by the Fed remains uncertain. However, markets have priced in five rate cuts for the year, reflecting optimism that has contributed to a strong stock market rally in January.