Recent GDP data highlight the economic challenges facing Germany, which saw a contraction of 0.2% year-on-year in the fourth quarter of 2023, culminating in an overall decline of 0.1% for the year. In stark contrast, the US economy expanded by 2.5% in the same quarter and by 3.1% throughout 2023 compared to the previous year. This divergence in economic performance is reflected in the bond and equity markets, Invesco points out.
Although historically, the economic growth rates of the US and Germany were closer when adjusted for population changes, recent figures underscore the US’s superior performance. Over the past twenty years, the US GDP grew by 52.8% compared to Germany’s 31.0%, but per capita growth was nearly equal, highlighting that demographic factors, specifically the higher population growth in the US_., have been a major contributor to its aggregate economic growth.
“The US has outperformed Germany to an unusual degree since 2019, largely on the back of government debt and falling savings rates. Neither the US government nor US households seem well positioned to spur future growth nor to deal with shocks,” say Paul Jackson, Global Head of Asset Allocation Research at Invesco.
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