Positive Signals Indicate U.S. Economy Growth

Thanks to the series of supportive policies, data shows robust growth driven by strong consumer spending backed by robust and steady job growth, growing wages and declining inflation.

Real GDP Increase 2.5 Percent in 2023

Real GDP Growth mainly due to strong consumer spending, revival of manufacturing structure investment, increased state and local government purchases. Sound households balance sheet and strong labor market are the primary drivers of the strong consumer expenditures.

Historic High Level of Manufacturing Investment Potentially Boost the U.S. Economy

The major factors are the Inflation Reduction Act., Infrastructure Investment and Jobs Act, CHIPS and Science Act and other supportive policies. The key drivers of the manufacture construction boom is the Computer, Electronics and Electrical section, while other sections of Chemical, Food, Beverage, Tobacco are relatively consistent. Semiconductor manufacturing falls in Computer, Electronics and Electrical section.

Semiconductor Industry is Booming

Major semiconductor players have undertaken and announced US-based fab construction projects, and more are under consideration. Intel invests $36 billion in Hillsboro,OR and other Largest Projects in Arizona, New Mexico and Ohio. IBM $20 billion in NY. Texas is still the destination of big companies, where Texas Instrument invests $30 billion in Sherman, Texas, Simens $150 million, Samsung $40 billion, NXP $2.6 billion.

Find more information and resources about the semiconductor roadmap in the US on the SIA. 

Battery/EVs manufacturing investment surge in the last 3 years

Federal policies have dramatically expanded and accelerated investment in manufacturing facilities for U.S. electric vehicles and the batteries to power them. The vast investment builds a great potential growth of the U.S. economy.

Total Net Worth of U.S Households Surged In Late 2021 and 2023

Due to the significant increase in home and stock values, and the pandemic-era government stimulus checks, enhanced unemployment benefits, and child tax credit issued to prop up households. Around 70% of households asset is financial asset, while 30% of non-financial asset. The surging networth of households contribute to more consumer spending, which fuels up the U.S. economy growth.

Inflation Rate Under Controlled At a Relatively Low Level

Inflation rate, one of the U.S economy indicator, comes down to below 3%, after peaked at July2022.

The Federal Reserve has aggressively raised the interest rate in a bid to fight the highest inflation in the last two years. Although the inflation rate decline, reaching to the Central Bank’s target of 2%, the Federal Reserve hold the interest rate at high level for the 5^th consecutive meeting. The timing of 1^st interest rate cut is quite critical, it would undo the progress to bring down the inflation and the becoming positive economy outcomes if cut too soon, or it could fail to prevent the economy from recession if cut too late. Economy remains solid according to Powell’s view, and there is not appropriate rush to cut the rate until certain sustainable trend.

Consumer Spending Growth Also Remains Healthy

Although fell sharply to +0.1% at Jan2024, and bounced back to +0.8% at both Feb and March 2024, most economists expected a moderate 2024. Consumer spending has been always the key driving force of the U.S. economy.

Mainly U.S Stocks soared to record high in 2024, with the S&P 500 topping the 5,300 points ,Dow reached to around 40,000 points ,Nasdaq hit around 17,000 points.

Goldman Sachs comments to CNN that, “ it doesn’t look like the economy is anywhere closed to a recession.”

Vulnerability of U.S. Economy Brings Concerns of Recession

The U.S economy grows at a restrained pace in the first quarter of 2024 than 2023, down to 1.6% on an annualized basis. “When you have economic growth at a pace under 2%, that can be considered ‘ stall speed’,” says Rob Haworth, Senior investment strategy director at U.S. Bank Wealth Management.

Income Equality is One of The Factors Make The U.S. Economy Growth Unsustainable.

Although the national family net worth is rising, the level of income equality expanded for the last decades. Until 2023Q4, the top 1% accounts for 30.3% of the national wealth, growing from 27.8%, while the middle class’s wealth decrease from 32.4% to 30.6% This has led to increased social and political tensions, as well as a weakening of the middle class.

This widening income gap has had significant implications for the middle class. As the top earners accumulate more wealth, they have more resources to invest in assets like stocks and real estate, further increasing their wealth. Meanwhile, the middle class may struggle to keep up with rising costs of living, stagnant wages, and limited opportunities for financial growth.

Another Biggest Problem Sits on The Rising Levels of National Debt.

Between Trump-era tax cuts and Covid-era stimulus programs, the national debt has explored for several years, and the Biden’s inflation reduction Act add to the debt. The national budget deficit has reached to be around 7% of GDP. Currently the 10-year US Treasury yield is 4.4%, and the mortgage rate is 8%, which put a pressure on the economy growth. This debt burden could pose a threat to the long-term sustainability of the U.S. economy, as it may limit the government’s ability to respond to future economic downturns or crises.

Consumer Spending Shows Signs of Slowing Down

2023 is the slowest housing sales in 30 years with the high interest rate and a fear of recession.

According to U.S. Bureau of Economic Analysis, Disposable Personal Income might increase, but the saving increase slows down since Jan2024.

Unemployment Rate Under Control, But Heading UP

The unemployment rate rises to above 3.9% since April. 2024.

Conclusion

Vulnerability of U.S. economy brings concerns of recession. By staying informed, planning prudently, and remaining flexible, it is possible to navigate potential economic challenges and work towards sustainable growth.

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