Gross domestic product (GDP) growth accelerated slightly in the second quarter, mainly driven by the recovery of the external sector caused by the rebound in exports. Domestic demand growth of chemical products remained optimistic in the second quarter, but due to weak fixed investment growth, it slowed down from the previous quarter, which was partially offset by the acceleration of household spending growth. Looking at the third quarter now, economic growth may accelerate. In July, the Chicago Federal Reserve Bank's National Activity Index (a leading indicator of gdp) reached a four-month high, showing a stronger growth momentum than the previous month. In addition, the unemployment rate dropped significantly in July and consumer confidence continued to rise slightly, indicating that private consumption may remain healthy at the beginning of the quarter.
As the impact of the epidemic subsides and the labor market recovers, this year's GDP will grow rapidly. The Biden administration's adequate fiscal stimulus and loose monetary policy stance should also support economic activity. Nevertheless, the uncertainty of the new coronavirus variants and the continued tension with China pose downside risks. The members of the FocusEconomics team expect GDP to grow by 6.4% in 2021, a decrease of 0.2% from last month's forecast. Our team predicts that by 2022, the U.S. economy will grow by 4.1%.
Despite the domestic challenges and the rapidly changing global landscape, the US economy remains the largest and most important economy in the world. The US economy accounts for about 20% of global output, which is still higher than China. In addition, according to data from the International Monetary Fund (IMF), the United States ranks sixth in GDP per capita (PPP). The US economy is characterized by a highly developed and technologically advanced service industry, which accounts for about 80% of its output. The U.S. economy is dominated by service-oriented companies in the fields of technology, financial services, healthcare, and retail. Large American companies also play an important role on the global stage. More than one-fifth of the Fortune Global 500 companies are from the United States.
Although the service industry is the main engine of the U.S. economy, the U.S. also has an important manufacturing base, accounting for about 15% of output. The United States is the world's second-largest manufacturing country and is in a leading position in high-value industries such as automobiles, aerospace, machinery, telecommunications, and chemicals. At the same time, agriculture accounts for less than 2% of output. However, a large amount of arable land, advanced agricultural technology and generous government subsidies have made the United States a net food exporter and the world's largest agricultural exporter.
There are many reasons for the US economy to maintain its strong position. This country has abundant natural resources and perfect infrastructure. It also has a large number of well-educated and productive workforce. In addition, physical capital and human capital are fully utilized in a free market and a business-oriented environment. Both the government and the American people have contributed to this unique economic environment. The government has provided a politically stable, functionally sound legal system and regulatory structure, which has enabled the economy to flourish. The general population, including various immigrants, brings a solid professional ethics, as well as entrepreneurial spirit and adventurous spirit. The economic growth of the United States has been driven by continuous innovation, research and development, and capital investment.
The US economy is currently recovering from a period of considerable turbulence. A series of factors, such as low interest rates, widespread mortgage loans, excessive risk-taking in the financial industry, excessive consumer debt, and lax government regulation, led to a severe recession that began in 2008. The real estate market and several major banks collapsed, and the U.S. economy continued to shrink until the third quarter of 2009, which was the worst and longest recession since the Great Depression. In order to stabilize the financial system, the U.S. government spent 700 billion U.S. dollars to acquire assets related to non-performing mortgage loans and supported large enterprises in trouble. The government also launched a stimulus plan worth 831 billion US dollars, which will be used to boost the economy in the next 10 years.
Since the deep recession in 2009, the US economy has been recovering slowly and unevenly. The expansionary monetary policy further supported the economy. This includes not only keeping interest rates low, but also unconventional government purchases of large amounts of financial assets to increase the money supply and depress long-term interest rates—a practice known as "quantitative easing."