Worlds Apart

Image source: NordWood Themes @nordwood - Unsplash nazlisart - Shutterstock

What's going on?

Fresh data showed the US economy was firing on all cylinders again last quarter, even as Europe surrendered to a double-dip recession.

What does this mean?

The US economy grew at an annualized rate of 6.4% last quarter – a marked acceleration from the quarter before. That was largely down to an 11% uptick in the biggest contributor to the US economy: consumer spending. Clearly, then, the second government stimulus check and rapid job growth have worked wonders.

Europe wasn’t quite so lucky: its economy shrank 0.6% from the quarter before, officially plunging the region into a “double-dip” recession – that is, two periods of contraction separated by a brief stint of expansion. “My bad,” said Germany: Europe’s biggest and worst-hit economy shrank by 1.7% as consumers halted their spending till the sitüation sörts itself out.

Why should I care?

The bigger picture: The gap between both economies is growing.
The regions’ diverging economic performances mainly comes down to the diverging success of their vaccine rollouts. Almost a third of the US population has been fully vaccinated, which has allowed many states to relax their pandemic restrictions. Compare that to major European economies like Germany, France, and Italy, where less than 10% of the populations have had both jabs. At this rate, economists reckon, Europe won’t make up the ground it’s lost from the pandemic until mid-2022 – while the US should be back up to speed in the next few months (tweet this).

Zooming in: Big government isn’t going away.
The stimulus checks – along with various other support measures – are a big part of why US government spending grew by an annualized 6% last quarter. That’s the biggest jump since 2002, and the government isn’t stopping there: the US president’s recently proposed two more spending plans – one focused on infrastructure and the other on families – that would infuse trillions more dollars into the country’s economy over the next decade.

Originally posted as part of the Finimize daily email.

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