Last Year Was Essentially A Masterclass From The US In Defying A Recession

Last Year Was Essentially A Masterclass From The US In Defying A Recession
Theodora Lee Joseph, CFA

29 days ago1 min

What’s going on here?

The US economy pulled itself up by 3.3% last quarter, wrapping up a year that was essentially a masterclass in defying a recession.

What does this mean?

The US clinched the title of the world’s fastest-growing economy last quarter, fattening up by 3.3% from the same time the year before. Now it’s true, that is a comedown after the previous quarter’s 4.9%. But with the Federal Reserve (the Fed) keeping rates high to make sure inflation’s done for, and suppressing the economy in the process, a 3.1% uptick over the year as a whole was still more than economists expected.

US GDP

What’s more, with recent data showing that interest rates seem to be bringing inflation to a slow halt, and without doing the same to the economy, the Fed might have just swerved a recession and pulled off the ideal “soft landing”.

Why should I care?

For markets: No prizes for second place.

The US has clearly emerged from the pandemic in much better shape than China. Not long ago, economists wouldn’t have doubted China’s ability to overtake the States, nabbing the top spot as the biggest economy in the world. But recent data has essentially hushed those whispers, and that’s reflected in the stock market: US stocks reached record highs this week, while Chinese ones have fallen more than 20% in the last year.

China falls behind

Zooming out: The US is getting smarter.

Interest rates might not be the only driver behind stateside success, mind you. The Secretary of the US Treasury has said higher productivity – like when companies use better-skilled workers or advanced technology – could be stimulating the economy without stoking inflation. If that’s true, then AI solutions could be about to whip the US into even better shape.

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