United States flag United States: Economic and Political Overview

The economic context of the United States

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The United States is the world's largest economy, ahead of China. After a decade of growth, the country’s GDP growth rate turned negative in the aftermath of the COVID-19 pandemic, exacerbated by rising inequalities and obsolete infrastructure, which are slowing down potential GDP growth. However, output contraction in 2020 was less severe than other large advanced economies and the country recovered quickly from the shock, returning to pre-pandemic GDP levels in Q2/2021 already. The American Rescue Plan underpinned private consumption, contributing to overall GDP growth of 6% over the year, despite supply-side bottlenecks and the ongoing pandemic dragging partially the economic activity. The current account deficit widened in the last couple of years but is projected to remain steady in terms of GDP over the forecast horizon. Investment and household consumption are projected to be the main growth drivers in 2022, with the IMF forecasting a robust GDP growth of 5.2% before slowing to 2.2% in 2023.

Concerning public finances, the fiscal measures implemented to contain the effects of the COVID-19-induced crisis weighed heavily on the government budget, resulting in a deficit of 8.8% of GDP in 2021. Despite some additional spending planned in the new infrastructure bill, the deficit is expected to gradually decrease to 8.3% in 2022 and then again to 7.1% in 2023 (IMF), also thanks to the phasing out of pandemic-related measures and resumed economic activity. The government’s debt-to-GDP ratio, already on an upward trend in recent years, increased consistently to finance spending conceded to support households and businesses, reaching 133.3% in 2021 (from a pre-pandemic level of 108.5%). The U.S., however, enjoys unmatched financing flexibility, being the issuer of the US dollar, the world's main reserve currency. The IMF forecasts the debt burden to decline to 130.7% this year before picking up marginally in 2023 (131.1%). Headline inflation rose sharply over 2021 jumping to 4.3% amid strong base effects, high energy prices, and supply constraints. Although there are signs of wage pressure in several market segments, inflation is expected to move back towards the FED target of 2% over the forecast horizon (to 2.7% in 2023 following a rate of 3.5% this year), amid the relaxation of supply chain constraints and an adjustment in global energy prices.

The first impact of the COVID-19 crisis was incredibly heavy on the U.S. labour market, with the unemployment rate skyrocketing to 8.1% in 2020. The labour market, however, recovered quickly with unemployment falling to 5.4% at the end of 2021. Jobs growth has slowed sharply towards the end of the year, but average working hours have increased. The IMF sees a further reduction in unemployment, with a forecast rate of 3.5% in 2022 and 3% in 2023. American citizens enjoy one of the highest GDP (PPP) per capita in the world, estimated at USD 68,309 in 2021 by the IMF. Nevertheless, inequalities are still significant, as they tend to be worsened by current public health policies (with rising numbers of people without health insurance). In 2020, there were 37.2 million people in poverty, approximately 3.3 million more than one year earlier (U.S. Census – latest data available).

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 21,372.6020,893.75e22,939.5824,796.0825,938.16
GDP (Constant Prices, Annual % Change) 2.3-3.4e5.64.02.6
GDP per Capita (USD) 65,052e63,35869,37574,72577,881
General Government Balance (in % of GDP) -6.1-10.7-8.8-8.3-7.1
General Government Gross Debt (in % of GDP) 108.5133.9e133.3130.7131.1
Inflation Rate (%) 1.81.2e4.33.52.7
Unemployment Rate (% of the Labour Force) 3.78.15.43.53.0
Current Account (billions USD) -472.15-616.10-796.12-867.97-854.07
Current Account (in % of GDP) -2.2-2.9-3.5-3.5-3.3

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

The United States is a highly industrialised country with high levels of productivity and the use of modern technologies. Key sectors include agriculture (corn, soy, beef, and cotton); manufacturing of machinery, chemical products, food, and automobiles; and a booming tertiary market focused on finance, new technologies, insurance, real estate, rentals, and leases. The American agricultural sector is without doubt one of the world's largest, with California alone producing more than one-third of the country's vegetables and two-thirds of its fruits and nuts. Nevertheless, agriculture only accounts for 0.9% of GDP and employs 1.3% of the workforce (World Bank, latest data available). According to the latest data from the U.S. Department of Agriculture, keeping into consideration also food and related industries, the primary sector contributed USD 1.109 trillion to the U.S. GDP in 2019, a 5.2% share (the output of America’s farms alone contributed USD 136.1 billion). In 2020, 19.7 million full- and part-time jobs were related to the agricultural and food sectors - 10.3% of total U.S. employment. In the most recent survey, there were 2.02 million U.S. farms in 2020, for a total of 897 million acres of land (USDA).

Including a broad range of activities, the industrial sector contributes over 18.2% of GDP and employs 19.9% of the workforce. Besides the industries mentioned above, the country is also the world leader in the aerospace and pharmaceutical industries. Thanks to its abundant natural resources, the United States has become a leader in the production of a number of minerals and has been able to maintain diversified production. The country is the world's largest producer of liquid natural gas, aluminium, electricity and nuclear energy. It is the world's third-largest oil producer and, for several years, has also been developing shale gas extraction on a large scale. The manufacturing sector alone accounts for 10.9% of the country’s value-added. As per data from the Bureau of Economic Analysis, private goods-producing industries decreased 2.5% in Q3/2021; nevertheless, production at U.S. factories increased to its highest level in nearly three years in November.

The American economy is essentially based on services: the tertiary sector accounts for more than three-fourths of GDP (77.3%) and employs over 78.7% of the country's workforce. A big portion of GDP is composed of finance, insurance, real estate, rental, and leasing sector (22.3% in 2020); as well as professional and business services (12.8%). The governmental sector (at federal, state and local levels) accounted for around 12.6% of the country’s GDP in 2020; while the share of educational services, healthcare and social assistance has been growing to 8.6%, ahead of wholesale (5.8%) and retail sales (5.7% - U.S. Department of Commerce). The latest figures from the Bureau of Economic Analysis show that U.S. selected services total revenue for the third quarter of 2021 was USD 4,520.8 billion, an increase of 3.6% from the second quarter of 2021 and up 15.1% from the third quarter of 2020.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.4 19.9 78.7
Value Added (in % of GDP) 0.9 18.2 77.3
Value Added (Annual % Change) 5.4 2.3 2.2

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
74,8/100
World Rank:
20
Regional Rank:
3

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
8.30/10
World Rank:
7/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

 

Country Risk

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Latest Update: June 2022

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