Strong US growth to leave the EU faltering  

A MORE prosperous couple of years lie ahead for the US economy, with growth expected to be three times that of the European Union (EU), according to US economist David Hale and the Centre for Economics and Business Research (CEBR).

The CEBR’s quarterly global forecast, produced jointly with David Hale Global Economics, predicts that annual growth in the world’s largest economy will be just above three per cent in 2010 and then nearly 3.5 per cent in 2011.

In stark contrast, the European Union will lag behind, growing just 0.7 per cent in 2010 and 1.3 per cent in 2011, following a stumble in the fourth quarter of 2009 and weakness in most of the key indicators early in 2010.

The quarterly report, published today, shows that the US has experienced a massive boost to private sector productivity during the recession as the corporate sector ruthlessly cut its workforces. As a result, corporate profitability is much stronger in the US than across Europe, the CEBR said.

Reducing employment has also forced the US private sector to increase productivity dramatically and annual productivity growth now exceeds five per cent. In contrast, Germany and Japan did not reduce their workforces by as much and their productivity has consequently fallen by five to six per cent over the past year.

US business is therefore now far more competitive than it was one year ago, and it should enjoy robust export and profit growth during the next two years.

But despite the job losses, figures also reveal a solid start to 2010 for US household consumption while corporations have robust cash flow and will increase investment this year.

The stronger than previously expected growth in the world’s larrgest economy should point to more robust global growth.