The US tightened its grip on the title of world’s biggest economy last year as an irrepressible US consumer helped it pull away from China for a third straight year — at least by one measure.
US GDP increased 5.3 percent last year before adjusting for inflation, according to Bureau of Economic Analysis data released on Thursday. In comparison, China’s nominal GDP growth clocked in at 4.2 percent, the country’s National Bureau of Statistics reported two weeks ago.
The two nations’ contrasting challenges with prices in recent years help explain the widening gap between their GDP levels.
Photo: Bloomberg
The US figures are flattered by the elevated inflation rates that spurred historically aggressive Federal Reserve monetary policy tightening in 2022 and 2023. By contrast, China has been battling deflation — its so-called GDP deflator has indicated falling prices since mid-2023.
Relative sizes of economies can be measured in various ways. When adjusted for inflation, China continued to expand at a faster pace, with real GDP rising 5 percent — compared with 2.8 percent for the US.
However, nominal figures are often viewed as more relevant for things like corporate and government revenues and trade flows.
Typically, lesser-developed nations like China sustain faster economic growth rates as they catch up with their advanced rivals. China’s GDP per capita was US$12,614 in 2023, the latest year for which the World Bank has comparative data.
In the US, it was US$82,769 — showcasing the enormous catch-up potential for the world’s No. 2. However, Chinese policymakers have been struggling to contain a massive property-market slump, alongside depressed consumer confidence.
“China’s economy is in the midst of a painful but necessary transition from cement to silicon as the main driver of growth,” said Tom Orlik, the chief economist at Bloomberg Economics and a longtime China watcher. “The US continues to outperform, and in nominal terms its growth rate has been juiced by above-target inflation. The race for the world’s top GDP spot is still on. For now, the US is extending its lead.”
Consumer spending was the biggest driver of US growth last year, fueled by wage increases and employment gains. US payrolls climbed by more than 2.2 million last year, while average hourly earnings advanced 1 percent last month from a year earlier after adjusting for inflation.
That US consumption has also pulled in an increasing volume of imports, widening the politically sensitive trade deficit.
The merchandise trade deficit reached nearly US$1.1 trillion for January through November last year, and preliminary figures for last month released on Wednesday showed an unprecedented monthly deficit of US$122 billion.
China has been among the beneficiaries, with US imports from its geopolitical rival up 2.2 percent for January through November.
China’s own data showed the world’s biggest manufacturing nation accumulated a record trade surplus of some US$992 billion last year.
How this year will shape up is a major question for economists and global policymakers alike, with US President Donald Trump threatening to impose tariff hikes on US trading partners.
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