Growth Outlook for the United States: A Key Driver of Global Economic Growth
According to the World Bank, the United States is projected to have the highest growth rate among advanced economies this year. The bank recently upgraded its GDP forecast for the country by 0.9 percentage points, citing the continued solid expansion of the U.S. economy as the main driver of global growth.
The World Bank’s report, released on June 11, also raised the expected global growth for 2024 by 0.2 percentage points to 2.6 percent. In terms of individual countries, the United States saw the largest revision in growth, with an increase of 0.9 percentage points to 2.5 percent. This growth rate surpasses that of other advanced economies, including Europe and Japan.
The World Bank attributes the strengthening of growth in the United States to robust consumption, government spending, and reduced imports of goods and services. In contrast, weak activity in the euro area and Japan, due to feeble domestic demand, will be accompanied by resilient growth in the United States.
While the World Bank initially expected monetary policy easing in the United States to begin earlier, it now anticipates a delay due to elevated inflation and robust economic activity. The upward revision of U.S. GDP was based on positive data from this year, particularly in consumer spending.
However, the bank projects a slowdown in U.S. GDP to 1.8 percent next year. This deceleration is primarily attributed to the cumulative effects of past monetary tightening and a contractionary fiscal stance. The World Bank also expects growth to remain at 1.8 percent in 2026.
Ayhan Kose, the World Bank’s deputy chief economist, highlights the potential problem of high core inflation (excluding food and energy) and its impact on global growth. If major advanced economies delay interest-rate cuts due to high inflation, it could lead to tighter global financial conditions and weaker growth in developing economies.
Factors Affecting Growth and Challenges
In 2020, the United States experienced a 2.2 percent decline in GDP due to the COVID-19 pandemic. However, it rebounded with a 5.8 percent growth in the following year. The growth rate slowed to 1.9 percent in 2022 and increased slightly to 2.5 percent in 2023.
The first quarter of 2024 saw a GDP growth of 1.6 percent, lower than the previous quarter’s 3.4 percent and below estimates of 2.5 percent. The Conference Board Leading Economic Index (LEI) confirmed the expectation of softer economic conditions ahead for the United States, with a 0.6 percent decline in April.
Justyna Zabinska-La Monica, senior manager at The Conference Board, points out that elevated inflation, high interest rates, rising household debt, and depleted pandemic savings continue to pose headwinds to U.S. economic growth. The board projects real GDP growth to slow to under 1 percent from the second quarter to the third quarter of 2024.
JP Morgan predicts a deceleration in U.S. economic growth this year as the effects of monetary policies unfold. The institution expects only 0.7 percent growth in 2024. However, a March report by Deloitte offers a more optimistic outlook, projecting a growth rate of 2.4 percent for the United States this year, in line with the World Bank’s projections.
Deloitte highlights the strength of the job market, consumer spending, and exports as factors contributing to the optimistic outlook. It expects consumer spending, investment, and government spending to grow by a minimum of 2 percent this year, with exports predicted to grow by over 4 percent. Inflation is also expected to decline from around 3 percent in the second half of the year.
In conclusion, the United States is expected to be a key driver of global economic growth this year, with the highest growth rate among advanced economies. While there are challenges such as elevated inflation and potential delays in interest-rate cuts, factors such as robust consumption, government spending, and exports are expected to contribute to the country’s growth. The outlook for U.S. GDP remains positive, although there may be a slowdown in the coming years due to past monetary tightening and a contractionary fiscal stance.
