The wealthiest economies have changed and taken different paths and have had to recover from the effects of COVID-19.
Nevertheless, the United States has performed better than others since last year. The U.S. gross domestic product grew by a remarkable 5.2% in the third quarter, ahead of China, which has long been the engine of global growth.
This year, the United States has surpassed the European Union, the United Kingdom, Japan, Canada, and other advanced economies.
The IMF now expects US GDP to grow by 1.5% this year, more than double the growth rate expected for the U.K. economy and well ahead of the eurozone, which is forecast to grow by 1.2% this year.
The world’s most advanced economies are differences in energy prices, pandemic-era stimuli, and the transmission of higher interest rates.
However, longer-term structural factors also influence the divergence and give the United States an advantage. Still, the U.S. economy is expected to grow much slower as pandemic savings decline and borrowing costs remain flat.
energy prices
OECD chief economist Clare Lomberdelli reported that last year’s rise in energy prices had been the main driver of the gap between the U.S. and eurozone economies.
Inflation has been higher in Europe than in the United States because the region, including the United Kingdom, is a net energy importer. The U.K. and Eurozone economies were highly exposed to the surge in natural gas prices that followed the large-scale Russian invasion of Ukraine in February 2022, pushing up energy bills for households and businesses to record levels.
“Oil is a global commodity, but natural gas is segmented regionally,” said Preston Caldwell, chief U.S. economist at Morningstar Research Services. “Although natural gas prices went up (in the United States), they went up much more in Europe and had engaged in all kinds of rationing. That had a major effect on production, and some endures.”
Fiscal and monetary policy
While officials on both sides of the Atlantic turned on the fiscal stimulus taps to cushion their economies from the impact of COVID-19, the United States did so on a much bigger scale.
That generous government support, including debt payment moratoriums, shifting consumption patterns, and a “refinancing boom” amid historically low-interest rates, helped stuff Americans’ coffers.
Savings accumulated during the pandemic allowed U.S. consumers to keep spending despite the rising price, said Carsten Brzeski, global head of macroeconomic research at Dutch bank ING. That offsets the negative impact of inflation on consumption, the primary driver of the U.S. economy.
U.S. growth to slow, but A.I. boom looms
The economy is expected to experience a modest slowdown this quarter and over the next year. Morningstar’s Caldwell projects annualized growth rates, favored in the United States, below 1% during the second and third quarters.
In artificial intelligence alone, cumulative venture capital investment in the United States reached nearly $450 billion over the past decade, according to OECD data. That’s more than double the A.I. investment in China and almost ten times that in the European Union or the United Kingdom.
A concentration of innovative tech companies and a rapid uptake of new technologies have helped the United States notch substantial productivity gains, especially compared with Europe and the U.K., said Andrew Kenningham, chief European economist at Capital Economics.
