Cletus C. Coughlin

English

Research Papers in Economics

July 2005 InternationalEconomicTrends
Views expressed do not necessarily reflect official positions of the Federal Reserve System.
P
ublic discussion of many issues—current account
deficits, 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 3.6 percent, which is 0.8
percentage points greater than the projec-
tion for the next-best performer, Canada.
Productivity growth is the key reason
for the relatively strong U.S. performance.
In the table, the values on the right-hand side
of the columns (in bold) show G-7 produc-
tivity growth for 1995-2002, 2003, and
2004. Productivity, as measured by output per worker for the
entire economy, has increased at a faster rate in the United States
than in any other G-7 country over the past ten years. For the
period 1995-2002, U.S. productivity increased at an average
annual rate of 1.9 percent. The second leading country in terms
of productivity growth was Canada, with an increase of 1.5
percent. For 2003, U.S. productivity growth was 2.1 percent.
The United Kingdom, with a rate of 1.8 percent, was second.
A similar ranking holds for 2004, with U.S. growth at 3.3 percent
and British growth at 2.5 percent.
Regardless of how one assesses the economic challenges
facing the U.S. economy, U.S. growth has been noteworthy.
Moreover, such growth generates resources to confront these
challenges.
—Cletus C. Coughlin
1A graphical representation of these data, as well as the productivity data used
later, can be found in International Economic Trends Supplement. In the February
2005 issue, see pp. 2-3 for the economic growth data and pp. 12-13 for the
productivity data. 
U.S. Economic Growth, Relatively Speaking
G-7 Output and Productivity (annual percent change)
Output growth / Output per worker*
1995-2002 2003 2004 2005 (projected)
United States 3.2 / 1.9 3.0 / 2.1 4.4 / 3.3 3.6
Canada 3.5 / 1.5 2.0 / –0.3 2.0 / 1.1 2.8
France 2.4 / 0.5 0.9 / 1.4 2.1 / 2.0 2.0
Germany 1.5 / 1.0 –0.1 / 0.8 1.0 / 0.7 0.8
Italy 1.8 / 1.0 0.4 / 0.0 1.1 / 0.3 1.2
Japan 1.1 / 1.3 1.4 / 1.6 2.6 / 2.4 0.8
United Kingdom 2.9 / 1.3 2.2 / 1.8 3.1 / 2.5 2.6
SOURCE: 1995-2004 GDP data: for U.S., Dept. of Commerce, BEA; for all other
countries, OECD. 2005 data for all G-7 countries: IMF World Economic Outlook,
April 2005. Employment data: U.S., Dept. of Labor, BLS; Japan, OECD; Canada,
Statistics Canada; France, Institut National de la Statistique et des Études
Économiques; Germany, Bundesanstalt fur Arbeit; Italy, Istituto Nazionale di
Statistica; U.K., Central Statistical Office. Non-U.S. GDP data, OECD.
*Calculated as GDP/civilian employment.
Annual Edition

U.S. economic growth, relatively speaking

http://research.stlouisfed.org/publications/aiet/20050701/cover.pdf

U.S. economic growth, relatively speaking

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics