The world faced a slew of shocks in recent years – the COVID pandemic, inflation, war, and more. But one thing has stayed constant: The United States economy has come out in a better position than other large, rich nations.
The International Monetary Fund’s (IMF) World Economic Outlook, released Tuesday, projects that the U.S. will grow 2.8% this year – an upgrade of 0.2 percentage point from its July forecast – compared to the 0.9% average for the other G7 countries (Canada, France, Germany, Italy, Japan, EU and UK).
Takeaways from the IMF’s World Economic Outlook, October 2024
- This time last year, the IMF anticipated a U.S. slowdown to 1.5% growth in 2024. It hasn’t happened.
- The fund now projects a 2.2% U.S. growth in 2025, a 0.3 percentage point upgrade from July, which would put the country only behind Canada among G7 nations.
- The fund projects U.S. consumer prices will rise 1.9% next year, implying that the pandemic price spike is over and inflation next year will be back to the Federal Reserve’s target.
Economists attribute the strength of the U.S. economy to rising inflation-adjusted wages and strong consumer spending, all fueled by longtime investment. Experts say it boils down to Americans being more efficient workers.
Americans Get More Done
U.S. workers are more productive than their counterparts in Europe and Japan, as our country’s companies have more money to invest in innovation due to lower energy prices and strong government support.
Workers benefit from updated machinery and software to operate more efficiently. According to The Economist:
- The average U.S. worker will churn out $171,000 of goods and services this year, compared to $120,000 for a European employee and $96,000 for one in Japan.
- Americans’ hourly productivity has risen 70% since 1990, compared to just 29% in Europe and 25% in Japan, according to Conference Board data analyzed by The Economist.
The U.S. owes its economic powerhouse status to a robust business environment, in which workers switch jobs often and new companies pop up, according to The Economist. These conditions give rise to its dominant tech sector and other lucrative industries that create economic value.
But, productivity growth is declining worldwide, including in the U.S., which is bad news for global economic growth. AI might reverse this trend. Some economists are optimistic that it will boost productivity and turbocharge economies, but the IMF cites experts who say that governments need to do more to promote a competitive environment and support smaller businesses.
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