The US economy is doing way better than the rest of the rich world
Stefan Roussea/AP
- The US is performing much better than many other wealthy nations when comparing economic growth and inflation rates.
- The US had the highest GDP growth since the start of the pandemic among the G7 countries, an informal group of industrialized democracies.
- This data further suggests the US is not heading toward a recession.
Though many Americans are still feeling the effects of higher prices, the US economy is performing much better than many other wealthy countries.
Compared to the G7 countries, an informal group of industrialized democracies, the US has the highest gross domestic product growth over the last three years while also seeing inflation come down faster than most of those other wealthy countries.
The US came in well above the other G7 countries in terms of GDP growth since fourth quarter 2019, or right before the start of the COVID-19 pandemic, according to the OECD. The US grew 5.3% over the period, while Canada grew 3.5% and Italy 2.4%. Germany and the UK were both in the negatives.
The latest release from the Commerce Department showed that the US grew at a 2% annualized rate for first quarter 2023, showing that the economy is still growing at a pretty decent pace.
And despite last year's inflation spike, that best-in-class economic growth has been happening alongside more modest price increases than in the other rich countries. The US has been doing a lot better on official inflation than most of the G7, as measured by comparing inflation rates as measured by each country.
However, a recent analysis from the White House Council of Economic Advisors suggests an even better picture for inflation in the US. When looking at harmonized inflation, which which compensated for differences in the methods each country uses to calculate inflation, the US surpassed even Japan, peaking earlier and falling sooner than the rest of the G7 and currently enjoying the lowest inflation rate among the wealthy democracies.
Even when taking out food and energy prices, which were especially elevated in Europe due to the invasion of Ukraine, the US came in below the other G7 countries. The US's peak core inflation early last year was lower than that of Germany and the UK last month.
The US Consumer Price Index in May showed inflation was at 4% year over year, declining substantially from its over 9% peak last summer. This still remains above the nation's 2% inflation target.
Despite this data, "inflation going forward remains considerably uncertain across all G7 nations, including the US," the CEA wrote.
This data further signaled that the US is not heading toward a recession, a topic on many Americans' minds. But despite the US's outperformance on GDP and inflation, many Americans are still worried about the nation's economy.
Despite a jump in June, consumer sentiment is still around the levels of the Great Recession, suggesting Americans are still worried about a possible recession. Falling real wages and still-high prices have continued hurting millions of Americans, despite data showing a strong labor market and slowing inflation.
However, the labor market slowed drastically in June, with 209,000 nonfarm payroll jobs added. Job growth in May and April was heavily revised downward, suggesting the job market was not as hot as it seemed.
The degree of improvement in consumer attitudes will be determined by developments in labor markets, Joanne Hsu, director of the University of Michigan Surveys of Consumers, told Insider.
"Consumer spending has been supported thus far by really strong incomes, really strong labor markets, and if that remains the case, I think we're going to continue seeing this trend," Hsu said. "But if we see unemployment creep up, or if the inflation slowdown starts to reverse and come back again, I think all bets are off."
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