US economy grows at fastest rate in almost four decades

January 31, 2022

In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.

The US economy has grown at its fastest pace in almost 40 years as it launched a stern fightback from pandemic lockdowns.

Official figures from the Commerce Department revealed the economy grew by 5.7% - the highest growth since 1984.

However, as the Federal Reserve raises interest rates and the Government prepares to scale back stimulus packages, analysts expect growth to slow throughout this year.

The World Bank expects the economy to grow by 3.7% in 2022, in line with other forecasts.

Meanwhile, the labour market recovered 19 million of the 22 million jobs lost in 2020 due to the enforced shutdowns.

In Europe, Denmark said it would remove almost all coronavirus restrictions on February 1st, except for testing travelers from abroad. Denmark follows the UK, Ireland, and the Netherlands in scrapping measures aimed at reducing the spread of COVID-19, even though infections remain at or near record highs across the continent. Sweden, Norway, and Finland announced that they were likely to ease their restrictions in the coming days and weeks.

The debt crisis in China’s property sector has drawn attention to the role of local government financing vehicles (LGFVs), a tool used by local governments to borrow money without it appearing on their balance sheets. According to several reports, LGFVs have eclipsed private developers as the leading buyers of land parcels in China. The increase in off-balance sheet debt amid the pandemic is a key concern for policymakers as they try to manage growing risks to the economy. China’s LGFV debt totals roughly CNY 53 trillion, or roughly one-half of gross domestic product, Goldman Sachs estimates.

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