The United States remains the largest economy in the G20 at market exchange rates, although China is bigger when output is measured on a purchasing power parity (PPP) basis. On both measures, however, the US continues to have the highest GDP per head among the major economies. Its scale, technological leadership and deep capital markets still give it a uniquely strong position within the global economy.
Demographics and productivity
Demographic trends are generally more favourable than in most advanced economies. According to the UN’s median population forecast, the US population is expected to continue growing over the next 25 years, largely because of net immigration. However, immigration flows have recently fallen sharply, close to zero. If stricter immigration controls are maintained over the longer term, the result would probably be slower labour force growth and lower potential GDP growth. But, as Paul Krugman comments "Productivity isn’t everything but in the long run it’s almost everything" and the US leads all other G20 economies in its productivity performance. Over the last ten years, productivity (GDP per hour worked) has rsen faster than in any other advanced g20 economy, at 1.9% p.a.
Growth
Economic growth weakened sharply in the second quarter of 2026, with annualised growth slowing to just 1.5%. A rebound is expected in the third quarter, however, and full year growth should be comfortably ahead of 2%. The IMF forecasts growth of 2.3% in 2026 in its July 2026 forecast update, which assumes (reasonably) that oil prices average around $90 per barrel for the year.
Looking ahead, the economic consequences of the Iran war are mixed. Higher oil prices are reducing household disposable income. Weakening consumer confidence and the fact that wages are now growing more slowly than CPI inflation, provide a drag. But increased defence spending is providing some offsetting support and investment linked to the expansion of IT and AI infrastructure remains strong, potentially excessive, as demonstrated by spending on AI compared to historic investment manias (see chart).
Double deficits
The US does face some long-term structural challenges. Carbon emissions per head are the third highest in the G20, behind only Saudi Arabia and Australia, leaving the country some distance from achieving net zero emissions by 2050. Fiscal sustainability is another key concern. High public debt and persistent budget deficits imply that federal debt is on an unsustainable trajectory under conventional assumptions, potentially reaching 140% of GDP by 2031. Neither spending cuts nor stronger economic growth alone are likely to stabilise the debt ratio.
The external position is similarly unsustainable. Net external liabilities reached USD27.5 trillion in 2025, equivalent to around 90% of GDP. For most economies, this would create severe financial pressures. The US benefits from the dollar’s role as the world’s dominant reserve currency, but these imbalances still place downward pressure on the currency, especially as the dollar appears overvalued relative to its long-run real exchange rate average.
Competitive advantage
Despite these weaknesses, the US retains major competitive advantages. It ranks first globally for innovation and second for overall competitiveness, with a particularly dominant position in artificial intelligence and advanced technology. However, perceptions of governance quality and corruption have deteriorated over the past seven years, highlighting growing institutional and political strains beneath the economy’s underlying strength.