Why is the US economy so strong despite inflation, geopolitical tensions, and markets volatility?
The International Monetary Fund issued a report showcasing a new growth prediction for the United States and other major economies, showing the current state of the global economy.
The IMF raised its growth prediction for the United States, already the world’s largest economy, to 2.8% this year. Last July, the IMF predicted the US would grow by 2.6% in 2024.
If true, the United States will grow faster than any other G7 economy this year, far outpacing its peers in Europe and East Asia. A similar scenario took place in 2023 when the United States expanded by 2.9%.
Most analysts and economists predicted the US would fall into a recession in 2024, caused by high interest rates and waning consumer confidence. Instead, the US pushed through another year of historic growth, mostly driven by consumer consumption.
The United Kingdom and Brazil also saw their growth forecasts rise. The International Monetary Fund now predicts GDP growth of 1.1% and 3%, respectively.
The IMF decreased its growth forecast for the Eurozone, whose energy and production crises are still ongoing. GDP growth for the 20 countries using the euro was lowered to 0.8% in 2024 and 1.2% in 2025, with Germany showing continued signs of recession.
Why the US economy is so strong
The United States has experienced incredible levels of growth in recent years.
Despite the COVID-19 pandemic, the Russian invasion of Ukraine, and the Middle East war the United States fared better than any other advanced economy.
This outstanding level of growth was mainly due to savings accumulated during the pandemic years and the massive investments implemented by the Biden administration.
Americans, who usually consume more than the average Westerner, were forced to stay at home for years and accumulated billions of untapped dollars.
Moreover, Biden’s Inflation Reduction Act unleashed trillions of dollars of public investments to rebound the economy after the pandemic. The Biden administration also ramped up the US’s oil production, shielding the country from a major energy crisis despite sanctions against Russia.
The large influx of liquidity into the economy caused a spike in inflation, which reached a 40-year high in June 2022 at 9.8%.
Indeed, many agree that the average American did not experience economic growth, as it was largely overshadowed by a significant increase in prices.
Nevertheless, inflation is now tamed, falling to 2.5% in September. The United States achieved what many economists call a “soft landing”, the reduction of inflation without disturbing economic growth.
A scenario that many other Western economies will not have the pleasure to see.
