This is an excerpt from our most recent Economic Outlook report. To access the full PDF, please click here.
Putting the U.S. and World Economies Together
There are lots of loose ends, in discussions about the U.S. economy, vis-à-vis the world economy. Let’s spend some time this month, building a coherent macro map of what is going on, with a specific focus on GDP.
I. Intro: U.S. GDP Narrative
A. Real U.S. GDP vs. Real U.S. Potential GDP
Real potential GDP is the Congressional Budget Office (CBO’s) estimate of the output the U.S. economy would produce — with a high rate of use of its capital and labor resources. The data is adjusted to remove the effects of inflation. This chart is in $B of Chained 2017 U.S. dollars.
As the chart below shows, in 2024, U.S. real GDP (the blue line) is actually above U.S. real potential GDP (the red line). That means the U.S. economy is more than fully employing its stocks of capital and labor. In short, the FOMC continues to be losing the battle to cool the U.S. economy.
Image Source: St Louis Federal Reserve
B. Real U.S. GDP vs. Real U.S. GDP per Capita
Real U.S. GDP per Capita is our next focus. In the next chart, you see a rising level of U.S. real GDP per capita in 2017 dollars (aka how the U.S. population living standard is, on average).
Image Source: St Louis Federal Reserve
Higher production is usually associated with higher household incomes. So, higher GDP per capita is often associated with positive outcomes in a wide range of areas such as better health, more education, and even greater life satisfaction.
According to the latest IMF data for 2024, Ireland ($106K per capita), Switzerland ($105.6K), Norway ($94K) and Singapore ($88K) lead the U.S. ($85.3K). Mainland China? ($13.1K)
However, the quality of life may also depend on the distribution of GDP among the residents of a country, not just the overall level.
To try to account for such factors, the United Nations computes a Human Development Index, which ranks countries not only based on GDP per capita, but on other factors, such as life expectancy, literacy, and school enrollment.
Since the 2020 COVID pandemic, the two U.S. series (GDP per capita and real GDP) are tracking closer and closer together.
My guess is this is showing an increased population, through higher U.S. immigration. The added households could help to pull real GDP per capita down towards real GDP.
C. Real U.S. GDP vs. Real U.S. Personal Consumption Expenditures
Real Personal Consumption expenditures? Those are rising well above real GDP.
This is a confirmation of most macro narratives you read: Personal consumption in the U.S. really has been much stronger — in the post-pandemic period.
Image Source: St Louis Federal Reserve
Image: Bigstock
Putting the U.S. and World Economies Together
This is an excerpt from our most recent Economic Outlook report. To access the full PDF, please click here.
Putting the U.S. and World Economies Together
There are lots of loose ends, in discussions about the U.S. economy, vis-à-vis the world economy. Let’s spend some time this month, building a coherent macro map of what is going on, with a specific focus on GDP.
I. Intro: U.S. GDP Narrative
A. Real U.S. GDP vs. Real U.S. Potential GDP
Real potential GDP is the Congressional Budget Office (CBO’s) estimate of the output the U.S. economy would produce — with a high rate of use of its capital and labor resources. The data is adjusted to remove the effects of inflation. This chart is in $B of Chained 2017 U.S. dollars.
As the chart below shows, in 2024, U.S. real GDP (the blue line) is actually above U.S. real potential GDP (the red line). That means the U.S. economy is more than fully employing its stocks of capital and labor. In short, the FOMC continues to be losing the battle to cool the U.S. economy.
Image Source: St Louis Federal Reserve
B. Real U.S. GDP vs. Real U.S. GDP per Capita
Real U.S. GDP per Capita is our next focus. In the next chart, you see a rising level of U.S. real GDP per capita in 2017 dollars (aka how the U.S. population living standard is, on average).
Image Source: St Louis Federal Reserve
Higher production is usually associated with higher household incomes. So, higher GDP per capita is often associated with positive outcomes in a wide range of areas such as better health, more education, and even greater life satisfaction.
According to the latest IMF data for 2024, Ireland ($106K per capita), Switzerland ($105.6K), Norway ($94K) and Singapore ($88K) lead the U.S. ($85.3K). Mainland China? ($13.1K)
However, the quality of life may also depend on the distribution of GDP among the residents of a country, not just the overall level.
To try to account for such factors, the United Nations computes a Human Development Index, which ranks countries not only based on GDP per capita, but on other factors, such as life expectancy, literacy, and school enrollment.
Since the 2020 COVID pandemic, the two U.S. series (GDP per capita and real GDP) are tracking closer and closer together.
My guess is this is showing an increased population, through higher U.S. immigration. The added households could help to pull real GDP per capita down towards real GDP.
C. Real U.S. GDP vs. Real U.S. Personal Consumption Expenditures
Real Personal Consumption expenditures? Those are rising well above real GDP.
This is a confirmation of most macro narratives you read: Personal consumption in the U.S. really has been much stronger — in the post-pandemic period.
Image Source: St Louis Federal Reserve