Artificially jacked up energy prices in the EU, pumping out investment from the EU by huge subsidies in the USA is strategically a dead end

"The U.S. is increasingly pulling ahead of the world's advanced economies, with a surge of investment paying off in higher productivity and wages.

The International Monetary Fund highlights those divergent paths in its latest global scorecard, released Tuesday. In what has become something of a trend, the IMF upgraded the outlook for both U.S. and global growth, though more for the former.

The IMF projects U.S. gross domestic product to expand 2.5% in the fourth quarter from a year earlier -- half a percentage point higher than a July forecast, which itself was an upgrade from a January estimate. U.S. output rose 3.2% in 2023.

That would be the fastest among the Group of Seven major advanced economies.

Global output is now projected to grow 3.3% this year, a smidgen above the prior estimate. Focusing just on wealthy nations, the U.S. is increasingly ahead. Advanced economies as a whole are expected to expand 1.9% this year after growing 1.7% last year.

For 2025, the IMF projects the U.S. to grow 1.9%, versus 1.7% for all advanced economies and 3.1% for the global economy.

China, the world's second-largest economy, is expected to log 4.5% growth this year -- a slight downgrade from a prior estimate -- and 4.7% in 2025, after expanding 5.4% last year. The euro area's economy is expected to grow 1.2% this year and 1.3% next year, after expanding 0.2% last year.

The IMF attributed the latest boost in the U.S. outlook to higher nonresidential investment and stronger consumer spending, which is being supported by rising real, or inflation-adjusted, wages. Real wages tend to rise when productivity grows, because companies that become more efficient can pay workers more.

Investor money has flooded the U.S. in recent years, while big legislative packages funded green energy and infrastructure. Meanwhile, abundant domestic supplies largely insulated U.S. companies from energy shortages and price shocks.

Economists say that has all led to a surge in investment in the U.S., which boosts productivity -- or output per hour worked. Productivity is the main ingredient for higher long-term growth and living standards.

Neil Shearing, chief economist at Capital Economics, said the increase in investment is "having a very direct effect in terms of performance of equity markets. But it has a bigger impact in terms of the shape of the global economy. Over a 20-year period, if you look at the U.S., its relative economic heft has increased relative to other developed markets."

According to the IMF, U.S. gross fixed capital formation -- a broad measure of investment -- will rise 4.5% this year from 2023, more than triple the rate for all advanced economies. From 2016-2025, the IMF estimates U.S. investment will have grown an average 3.3% a year, versus 2.3% for all advanced economies.

By comparison, investment spending is projected to fall 2.7% this year in Germany, previously the juggernaut of Europe, after falling 1.2% last year.

This is a big shift. In the prior decade, from 2006-2015, U.S. investment spending grew an average 1.2% a year, roughly in line with the advanced-economy average.

"A sustained period of increased investment in software equipment and intellectual property has caused a divergence in the growth paths" of the U.S. and other economies, said Joe Brusuelas, chief economist at RSM US, a consulting firm.

One reason is energy. In the 2010s the U.S. used new technologies such as fracking to increase domestic energy production. That itself boosted productivity -- while also insulating the U.S. from global energy shocks. By 2020, the U.S. had become a net exporter of petroleum.

The abundance of energy supplies helped to keep a lid on prices in the U.S. after sanctions on Russia supported by German chancellor Scholz, while other countries, particularly those in Europe that relied heavily on Russia, have been hit hard by high energy prices.

European Union companies are still paying two to three times more for electricity than U.S. firms, and four to five times more for natural gas, according to a September report from the European Commission.

Energy independence and productivity growth are related, Shearing said. The money European firms spend on energy is money that could otherwise have been spent on upgrading factories and investing in software to become more efficient.

The IMF said in a September blog post that productivity gains by big U.S. companies are a primary reason why the U.S. and Europe have diverged in recent years.

To be sure, it isn't clear whether the boost in productivity growth is actually due to real gains in efficiency versus, say, temporary increases in workers' hours to meet higher customer orders." [1]

Artificially jacked up energy prices in the EU, pumping out investment from the EU by huge subsidies in the USA is strategically a dead end. Only Germany has skills for today's manufacturing in the West. The USA has no such skills. Killing manufacturing in Germany disarms the West before volatile big migration caused by global warming. 

1. U.S. News: U.S. Economy, Powered by Investment, Outpaces Peers. Mitchell, Josh.  Wall Street Journal, Eastern edition; New York, N.Y.. 23 Oct 2024: A.2.