The eurozone economy has narrowly avoided entering recession. Growth was exactly zero in the last quarter of 2023, compared with 0.5 percent growth for the entire previous year. The German economy shrank in the fourth quarter, and the entire eurozone is feeling the effects. “Compared to the figures coming out of the US, this is very low,” says economist Edin Mujakic.
Good US growth statistics are often artificial
How do these statistics compare to US statistics?
The economy has grown by 3.1 percent over the previous year. It is very different with Europe. In the last three months of last year, there was a growth of 3.3 percent, compared to zero growth. That big difference has to do with US reporting, which they call the 'annual count' over there. Had it been reported the European way, there would have been 0.8 percent growth.
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How do you explain that difference?
We are used to seeing percentage growth in these types of things. But if we look at the absolute figures per conversion, we see something. Because the US economy expanded by $329 billion in the last three months of last year. But if you look at the budget deficit in the last quarter of last year, the federal government was $510 billion. If the government is red, it will spend that money too. If you take these two figures together, you can say that without those huge budget deficits, the US economy would have had an incredibly difficult time growing. So you could say that the better performance of the US economy is mostly artificial because it is mostly due to rising debts. Compared to the first half of last year, national debt has actually decreased in the euro countries, while national debt in the US has been increasing.
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What does this say about the US economy?
If you had $329 billion in economic growth last quarter, but you're also dealing with a $510 billion budget deficit, that means you need more than a dollar of debt for every dollar of economic growth. Seen this way, America's growth rate is more to cry about than to be happy about.
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But growth is just growth, right?
If your growth depends only on the growing large budget deficit in the country, it does not seem like desirable growth to me. Desired growth occurs when more people work and the productivity of those people increases. In fact, you would be happier with 1 percent growth from those sources than 3 percent growth because the government is spending a lot of money. That money accumulates in the form of loans, which means interest costs go up. This way you really only bring growth from the future, but that's it.
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