The U.S. tightened its grip on the title of world’s biggest economy in 2024 as an irrepressible American consumer helped it pull away from China for a third straight year — at least by one measure.

U.S. gross domestic product increased 5.3% last year before adjusting for inflation, according to Bureau of Economic Analysis data released Thursday. In comparison, China’s nominal GDP growth clocked in at 4.2%, the country’s National Bureau of Statistics reported two weeks ago.

The two nations’ contrasting challenges with prices in recent years help explain the widening gap between their GDP levels. The U.S. figures are flattered by the elevated inflation rates that spurred historically aggressive Federal Reserve monetary policy tightening in 2022 and 2023. By contrast, China has been battling deflation — its so-called GDP deflator has indicated falling prices since mid-2023.

Relative sizes of economies can be measured in various ways. When adjusted for inflation, China continued to expand at a faster pace, with real GDP rising 5% — compared with 2.8% for the U.S. But nominal figures are often viewed as more relevant for things like corporate and government revenues and trade flows.

Typically, lesser-developed nations like China sustain faster economic growth rates as they catch up with their advanced rivals. China’s GDP per capita was $12,614 in 2023, the latest year for which the World Bank has comparative data. In the U.S., it was $82,769 — showcasing the enormous catch-up potential for the world’s No. 2. But Chinese policymakers have been struggling to contain a massive property-market slump, alongside depressed consumer confidence.

“China’s economy is in the midst of a painful but necessary transition from cement to silicon as the main driver of growth,” said Tom Orlik, the chief economist at Bloomberg Economics and a longtime China watcher. “The U.S. continues to outperform, and in nominal terms its growth rate has been juiced by above-target inflation. The race for the world’s top GDP spot is still on. For now, the U.S. is extending its lead.”

The U.S. also demonstrated its continuing exceptionalism against its developed-world counterparts last year. Thursday’s GDP release came hours after both France and Germany reported quarterly contractions in their economies during the final three months of 2024.

Consumer spending was the biggest driver of U.S. growth last year, fueled by wage increases and employment gains. American payrolls climbed by more than 2.2 million last year, while average hourly earnings advanced 1% in December from a year earlier after adjusting for inflation.

Trade disparity

That U.S. consumption has also pulled in an increasing volume of imports, widening the politically sensitive trade deficit. The merchandise trade deficit reached nearly $1.1 trillion for January through November last year, and preliminary figures for December released Wednesday showed an unprecedented monthly deficit of $122 billion.

China has been among the beneficiaries, with U.S. imports from its geopolitical rival up 2.2% for January through November. China’s own data showed the world’s biggest manufacturing nation accumulated a record trade surplus of some $992 billion in 2024. While President Xi Jinping has repeatedly vowed to ramp up his nation’s imports, subdued domestic demand has made that a challenging task.

How 2025 will shape up is a major question for economists and global policymakers alike, with newly installed President Donald Trump threatening to impose tariff hikes on U.S. trading partners.

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