The US entered recession earlier than the UK and Europe, and suffered its inflation surge earlier too, so it was always likely that its economy would recover earlier. But is the US emerging from recession while Europe and the UK are still plunging into theirs? That’s what today’s data from the Bureau of Economic Analysis suggests. Real US GDP grew in the third quarter of the year by 0.3 per cent, making for an annualised rate of 2.9 per cent. The figure was negative for the first two quarters of 2022, shrinking by an annualised rate of 0.6 per cent in the second quarter.

By contrast, the UK economy shrank by 0.2 per cent in the third quarter (quarter on quarter), and is up 2.4 per cent over the past year. Eurozone GDP rose by 0.8 per cent in the third quarter and is up 2.1 per cent over the past year. In both the UK and the Eurozone, however, the direction of travel is clearly downwards, with purchasing managers’ indices showing sharp contraction.

The US, then, appears to have emerged from a short recession (although Joe Biden refused to recognise two quarters of negative growth as such, in spite of this being a widely-used definition). In the UK and the Eurozone, by contrast, a recession has yet to officially arrive. There is a caveat to add: all figures for the third quarter are provisional and are subject to revision. In Britain, the second quarter figures were revised sharply upwards, from minus 0.1 per cent to plus 0.2 per cent, so the figures cannot be considered to be fixed.

Even so, it ought to be no surprise if the US does emerge into recovery while Europe remains in the dumps. The biggest economic headwind in Europe is the energy crisis, caused by the collapse in gas supplies from Russia. The energy self-sufficient US, by contrast, does not face such a crisis. There, inflation is more the product of Biden’s helicopter money, coming on top of years of quantitative easing.

The US economy has outperformed Europe for a long time, but could the differential be about to accelerate as a result of energy policy? Over the next few years, even if there is a quick resolution to the Ukraine war, Europe will be subject to its own, self-imposed net zero policies, which are forcing a switch away from fossil fuels to less reliable sources of energy.The US, even under Biden, has placed itself under no such obligation. While Biden’s Inflation Reduction Act does introduced measures aimed at reducing carbon emissions, it places no legal obligation to reach net zero by any particular date.

By contrast, Europe has voluntarily placed itself under long-term energy scarcity. Although the situation is currently clouded by the Ukraine war, the implications of that decision will become clear in due course. A widening gap between economic growth in the US compared with Europe may well come to be a theme for the next few years.

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