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U.S. economic growth, relatively speaking

  • Economics


U.S. Economic Growth, Relatively Speaking July 2005 InternationalEconomicTrends Views expressed do not necessarily reflect official positions of the Federal Reserve System. Public discussion of many issues—current accountdeficits, federal budget deficits, Social Security reform,high oil prices, a possible housing price bubble, and Chinese exchange rate policy, to name a few of the more prominent ones—has obscured the point that, relatively speak- ing, the U.S. economy has expanded at a healthy pace. The table illustrates this point by juxtaposing the performance of the U.S. economy with that of other high-income countries. In the table, the values on the left-hand side of the columns show GDP growth for the G-7 countries for 1995-2002, 2003, and 2004, as well as the International Monetary Fund’s projec- tions for 2005.1 Over the past ten years, U.S. economic growth has compared favorably with that of the other G-7 countries. Using the simple average of annual growth rates for 1995-2002, one sees that the English-speaking G-7 members converge at the top. The United States, with a growth rate of 3.2 percent, trails only Canada, which grew at a rate of 3.5 percent. More recently, U.S. economic growth has exceeded the growth of the other six countries. For 2003, the U.S. economy grew at a 3 percent rate. The United Kingdom and Canada grew at a pace roughly 1 percentage point slower, and Japan grew at a pace roughly half the U.S. rate. Meanwhile, the three continental European countries generated negligible growth. G-7 growth accelerated in 2004. The U.S. econ- omy grew at a 4.4 percent rate, more than 1 percentage point faster than the growth in the second-fastest country, the United Kingdom. Despite their accelerating growth, the three continental European countries continued to grow relatively slowly. Projections for 2005 suggest that the United States is likely to continue to lead G-7 countries in economic growth. Despite some slowing, U.S. economic growth is projected to be

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