ICYMI: "Falling inflation, rising growth give U.S. the world's best recovery"

Thanks to President Biden's leadership coming out of the pandemic and historic investments in America, the United States is leading the world's economic growth—beating our peers.

As the Washington Post put it this weekend, "the surprisingly strong [U.S.] economy is outperforming all of its major trading partners" and "quashing fears of a recession." The American people are benefitting: "U.S. wages — after inflation — grew 2.8 percent" over the last four years, outpacing all other G7 countries.

Bloomberg and CNN came to similar conclusions when comparing the U.S. economy to China: "The US has pulled further ahead of China in the race for world's biggest economy," as Bloomberg put it. CNN wrote: "The US economy is growing faster than Wall Street expected, markets are soaring and inflation is approaching the Federal Reserve's 2% target. It appears that a soft landing, where price rises are tamed and the economy manages to avoid recession, is possible. Meanwhile, China's economy appears to be in distress."

This economic success is no accident—it's thanks to the leadership and investments made by President Biden, Vice President Harris and Congressional Democrats.

Read more below:

Washington Post: Falling inflation, rising growth give U.S. the world's best recovery
[David J. Lynch, 1/28/24]

[…] [T]he surprisingly strong [U.S.] economy is outperforming all of its major trading partners.

Since 2020, the United States has powered through a once-in-a-century pandemic, the highest inflation in 40 years and fallout from two foreign wars. Now, after posting faster annual growth last year than in 2022, the U.S. economy is quashing fears of a recession while offering lessons for future crisis-fighting.

"The U.S. has really come out of this into a place of strength and is moving forward like covid never happened," said Claudia Sahm, a former Federal Reserve economist who now runs an eponymous consulting firm. "We earned this; it wasn't just a fluke."

On Friday, President Biden hailed fresh government data showing that annual inflation over the second half of 2023 fell back to the Federal Reserve's 2 percent target. Coupled with Thursday's news that the economy grew by 3.1 percent over the past 12 months, the Commerce Department report showed that the United States appears to have achieved an economic soft landing.
[…]
Consumer spending is driving the economy: Real consumption rose by 0.5 percent in December, its fastest pace since last January. Pending home sales jumped, too. Following the flurry of good news, JPMorgan Chase economists said they raised their first-quarter growth forecast.

IBM, Visa and General Electric last week each reported earnings that topped analysts' expectations, another sign of the economy's continued health.

The $28 trillion U.S. economy weathered multiple shocks over the past year and returned to the growth path it was on before the pandemic. The size of the economy, adjusted for inflation, regained its pre-pandemic peak in early 2021. Through the end of September, it was more than 7 percent larger than before the pandemic. That was more than twice Japan's gain and far better than Germany's anemic 0.3 percent increase, according to British Parliament data.

For most Americans, the growth paid off in the form of higher wages. Over the four years through September, the most recent comparison available, U.S. wages — after inflation — grew 2.8 percent.

Most other countries in the Group of Seven industrial democracies saw a decline, according to Treasury Department data. Italian wages sank by more than 9 percent over that period, while German workers earned 7.2 percent less than they had before the pandemic.

"The U.S. has seen a particularly strong GDP recovery, and inflation has cooled sooner and more quickly than in other large, advanced economies. And the increase in real wages is unique to our country's recovery," Treasury Secretary Janet L. Yellen said in a Chicago speech last week.

The origins of this doom-defying performance can be traced to lawmakers' swift response to the coronavirus pandemic in March 2020. Before the month had ended, Congress approved more than $2 trillion in help for the economy as businesses closed and 17 million Americans lost their jobs.
[…]
As the pandemic eased, Biden secured other legislative wins on infrastructure, semiconductor industry subsidies and clean-energy projects. These were not designed as stimulus programs, but by sending additional rivers of money into the economy, they had that effect, according to Dean Baker, an economist with the Center for Economic and Policy Research.

"These began to kick in last year as the effect of the initial stimulus was waning," he said. "I realize this was largely luck, but it was incredibly good timing."
[…]
Some economists see more than government policy behind the U.S. recovery. As the pandemic made millions of Americans jobless almost overnight in the spring of 2020, many responded by launching business ventures.

That trend has continued for four years. In December, 457,316 applications for tax identification numbers were lodged with the Internal Revenue Service, compared with 314,337 in December 2019.

"I think we're seeing something about the American spirit and the kind of economic dynamism that — for whatever reason — doesn't exist in other high-income countries to the extent that it exists here," Strain said. "One of the most interesting things happening in the economy right now, and over the last few years, is the big boom in entrepreneurship."

Bloomberg: US Extends Lead Over China in Race for World's Biggest Economy
[Rich Miller and Enda Curran, 1/25/24]

The US has pulled further ahead of China in the race for world's biggest economy, thanks in part to a vibrant American consumer.

US gross domestic product rose 6.3% in nominal terms — that is, unadjusted for inflation — last year, outpacing China's 4.6% gain. While some of the outperformance reflected America's elevated price increases, the 2023 outturn underscores a broader point: The US economy is emerging from the pandemic period in a better place than China's.

"It is a striking turn of fortunes," said Eswar Prasad, who once led the International Monetary Fund's China team and is now at Cornell University. "The strong performance of the US economy, in tandem with all the short-term and long-term headwinds the Chinese economy is facing, renders it a less obvious proposition that China's GDP will someday overtake that of the US."

The economic outperformance is reflected in the respective countries' stock markets. US shares have hit all-time highs this week, while Chinese equities are mired in a $6 trillion-plus bear-market rout.
[…]
GDP data released on Thursday showed the US economy ended the year with a bang, growing 3.3% in real, inflation-adjusted terms in the fourth quarter after expanding 4.9% in the third. Inflation is on its way back down to the Fed's 2% target and fears of a recession are fading.

China, by contrast, is struggling under the weight of a years-long real estate bust and its worst streak of deflation in some 25 years. Exports — once a critical pillar of growth — declined in 2023, joblessness among young people has soared and local governments are saddled with too much debt.
[…]
The US, meanwhile, has surprised economists with the resiliency of its economy coming out the pandemic. Some like Posen even suspect the country may be on the cusp of a pickup in productivity growth that will allow the economy to grow faster without generating inflation.
[…]
"All the talk of China becoming the world's largest economy by GDP has been put on the backburner and delayed, if not indefinitely postponed," Lipsky said.

CNN: The US is pulling ahead in the economic race with China
[Nicole Goodkind, 1/29/24]

The US economy is growing faster than Wall Street expected, markets are soaring and inflation is approaching the Federal Reserve's 2% target. It appears that a soft landing, where price rises are tamed and the economy manages to avoid recession, is possible.

Meanwhile, China's economy appears to be in distress. Markets are mired in a protracted slump, consumer confidence is weakening, growth is easing and the population is shrinking. A court has just ordered the winding up of Evergrande, with unpredictable consequences for China's real estate crisis.
[…]
Before the Bell: Is it fair to say that the US is outpacing China in the race for economic supremacy?

Eswar Prasad: The US has solidified its position as the main driver of global growth, which is all the more striking as the rest of the world is struggling to maintain decent growth.

Just last year people might have said the opposite — that the US was heading towards recession and the Chinese economy was thriving. What changed?

It is remarkable to see the US economy blazing ahead while the Chinese economy sputters and slips into deflation. This difference is mainly due to the innate resilience of the US economy while China continues to be held back by a number of short-term and long-term problems. These problems include a declining labor force, a property market that is unraveling, and a loss of household and business confidence in the government's policies.

The strong performance of the US economy and falling growth in China together make it less obvious that China's economy will someday overtake that of the US in terms of annual GDP, a proposition that was once considered a near certainty.
[…]