US Economic Growth: Here Today, Gone Tomorrow?

While America’s economy witnessed significant growth in Q2 2021, it seems that this will not be long-lasting. Given that the economy is kind of going back to some kind of post-pandemic “normal,” there could be a drop in economic growth.  According to Moody’s Chief Economist Mark Zandi:

“Growth has peaked, the economy will slow a bit in the second half of this year, then much more noticeably in the first half of 2022 as fiscal support fades. The contours of growth are going to be shaped largely by fiscal policy over the next 18 months. The tailwind just blows less strongly, and may stop altogether by this time next year.”

In 2011 America’s share of worldwide GDP was at a low of 21 percent.  In 2020 this number increased to 25 percent.  In real dollar terms, at the beginning of 2010 average incomes were recorded for Americans at more than 25 percent higher than their European counterparts. By the end of 2020 that figure had jumped to 60 percent.

Confidence in SMEs increased along with the United States’ share of global stock markets (from 42 percent in 2010 to 58 percent in 2020). The dollar gained almost unprecedented dominance, placing America in a leading global position.

However, just over a decade ago America owed the world a total of $2.5tn (the same as 17 percent of US GDP).  By early 2020 this had increased to over 50 percent of GDP at $10tn. That figure currently stands at $14tn and (GDP) 67 per cent, creating cause for concern.

US Economic Performance

According to the IMF, it is anticipated that America’s economy is on track to fare better than that of Canada, Germany and Japan.  Predicted contraction rates are:

  • America: 4.4 percent
  • Japan: 5.3 percent
  • Germany: 6 percent
  • UAE: 6.6 percent
  • Canada: 7.1 percent
  • France: 9.8 percent
  • UK: 9.8 percent

It is thought that the “macroeconomic good fortune” of the United States can be attributed to Washington’s spring stimulus. Plus, America does not have to rely on exports for its growth since such sales only account for 12 percent of US GDP.  This is pretty low when you look at the 32 percent in Canada, 47 percent in Germany and 18 percent in Japan. According to Moody’s Analytics Mark Zandi the greater flexibility of America’s labor market helps as:

 “Americans are more willing to adopt new technologies, to move for a job, and [to] make big changes in how they live and work.”

This is good news for the US economy.