- Calls for a US recession are still on the table, but the economy is still outpacing other rich countries.
- US GDP grew at a surprise 3.3% pace in the fourth quarter, beating estimates of 2.0%.
- Forecasts for the G7 countries show slower growth and higher inflation than the US.
Some Wall Street players still expect the U.S. to enter recession this year, but the latest data shows that not only is economic growth not stagnant, but that the country is faring better than its wealthiest allies.
The Bureau of Economic Analysis said last week that real GDP came in at a surprisingly high annual rate of 3.3% in the fourth quarter, beating consensus expectations of 2.0%.
This has pushed back the narrative for an inevitable recession, while also outpacing the growth seen in the Group of Seven peers, which make up some of the world’s wealthiest countries.
This trend has remained stable over the past few years, with the US leading the way in post-pandemic economic growth. According to seasonally adjusted figures from the OECD, the US saw its GDP grow by just 7.4% since the fourth quarter of 2019.
Canada and Italy varied between 3-4% cumulative growth over the same period, while Japan, the UK, France and Germany grew by 2.4%, 1.8%, 1.8% and 0.3% respectively.
Among countries using the euro, aggregate GDP grew by 0.1% year-on-year in the third quarter of 2023.
According to the IEA, US GDP growth reflected increases in consumer spending, state and local government spending, and exports, among other increases. And despite smaller job growth than in 2022, payroll employment increased by 2.7 million in 2023.
“Better-than-expected consumer spending was the main fuel for strong growth in the fourth quarter of last year,” Russell Price, chief economist at Ameriprise, told Business Insider. “While we expect some slowdown this year, we believe consumers are generally well-positioned to sustain a solid growth rate through 2024 and possibly beyond.”
In his view, consumer strength, as well as relatively low consumer debt burdens and pandemic stimulus and savings balances, bode well for the US.
In that regard, the International Monetary Fund raised its global growth forecast for the year to 3.1% from 2.9%, mainly due to a better-than-expected US expansion, in a report published on Tuesday. IMF economists expect US GDP to grow by 2.1% annually in 2024, more than double the forecast for all other members of the G7.
Still, the economic outlook for the U.S. varies from calls for a soft landing and shallow recession to more severe, year-long recessions.
The US also saw a promising trajectory for inflation. Government data released earlier this month showed the consumer price index rose 3.4% year-on-year in December. That’s down from multi-decade highs in 2022, but remains above the Federal Reserve’s 2% target.
Inflation remains highest in France and the UK at 4.1% and 4% respectively, according to the latest available cohort data.
As for monetary policy, it’s up in the air when the Fed will start easing interest rates. But markets priced in five cuts for the year, with optimism partly reflected in a strong stock market rally in January.