US to increase productiveness lead on again of AI growth, say economists

Greater than three-quarters of economists count on the US to keep up or widen its productiveness lead over the remainder of the world, due to synthetic intelligence, deep capital markets and comparatively low power prices, a Monetary Instances survey has discovered.

Within the international ballot, 31 per cent of 183 respondents thought the US would retain its benefit in productiveness, whereas one other 48 per cent anticipated the nation to extend its dominance.  

The economists had been based mostly in China, the Eurozone, the UK and the US.

Productiveness development — which measures progress in changing inputs resembling hours labored into items and providers — finally permits firms to extend wages and income, enhancing residing requirements.

US labour productiveness rose 10 per cent between 2019 and 2024, due to speedy technological advances and the reallocation of staff in the course of the Covid-19 pandemic. Against this, it remained largely stagnant within the UK and Eurozone, in accordance with OECD information.

Jumana Saleheen, head of Vanguard’s funding technique group in Europe, stated US productiveness was set to “draw back from different developed market economies” due to the nation’s dynamic capital markets, versatile labour power and lead in rising applied sciences.

She added that Europe risked “falling additional behind”, with analysis and growth nonetheless closely centered on conventional sectors resembling automotive and prescribed drugs.

Saleheen additionally famous structural challenges for the EU, together with fragmented infrastructure, extra inflexible labour markets and fewer supportive capital markets.

The US financial system is about for the strongest development within the G7 this yr, in accordance with the OECD — buoyed by a tech-led funding growth and inventory market beneficial properties which might be bolstering wealth and spending amongst better-off households.

The beneficial properties have helped counter a number of the financial harm completed by US President Donald Trump’s commerce wars however have additionally raised fears of an unsustainable AI-related bubble.

The FT survey, which was carried out in December, suggests economists don’t count on the tendencies powering US outperformance to be reversed quickly.

AI and associated digital applied sciences had been the brand new productiveness frontier, stated Nina Skero, chief govt of the Centre for Economics and Enterprise Analysis, and the US’s “place as a frontrunner in funding and growth of those applied sciences will prolong the US’s productiveness lead”.

The development is supported by a divergence in enterprise funding. Within the US, funding jumped 24 per cent within the second quarter of 2025 in contrast with the identical interval in 2019, earlier than the pandemic. It contracted 7 per cent over that point within the Eurozone, in accordance with Oxford Economics.

Some economists surveyed by the FT warned that the surge in AI funding might mirror a “bubble” — a time period talked about 25 instances in responses — and cautioned {that a} sharp correction may weigh on US output and productiveness.

A reversal within the inventory market beneficial properties made by US tech might even have worldwide repercussions by way of tighter monetary circumstances, softer exterior demand and rising threat aversion, some economists stated.

However the majority of respondents to the ballot, which represented the UK and Eurozone extra closely than China and the US, nonetheless anticipated America to keep up its productiveness edge globally. General, the ballot surveyed 207 economists, though not all responded to each query.

The US was ranging from a “place of power” within the productiveness race, stated Thomas Simons, chief US economist at Jefferies.

Respondents additionally pointed to the US’s structurally decrease and extra predictable power prices, versatile labour market and huge home financial system.

The US advantages from “structurally decrease and extra predictable power prices than Europe and plenty of Asian economies, underpinned by an administration that treats power coverage as a driver of financial prosperity reasonably than a automobile for ethical posturing on the expense of development and residing requirements,” stated Martin Beck, chief economist on the consultancy WPI Technique.

Europe is extensively seen by economists as constrained by over-regulation, weaker funding, inflexible labour markets and a enterprise surroundings much less beneficial to cutting-edge applied sciences. The UK had the extra weight of the Brexit legacy to cope with, some economists contended.

“Whereas the US and others have made main strides in AI, the UK has spent a lot of the final decade chasing the Brexit tail, diverting consideration and sources from innovation,” stated Evarist Stoja, professor of finance on the College of Bristol Enterprise College.

Specialists acknowledge that the US faces rising AI competitors from Asia. “Different nations — notably in Asia — will transfer to the frontier, that means that the relative benefit of the US will erode considerably however won’t be eradicated,” stated Jagjit S Chadha, professor of economics on the College of Cambridge. 

China has the second-largest cumulative enterprise capital funding in AI since 2012 after the US and over 3 times greater than the EU, in accordance with the OECD.

The US could also be on the forefront of the AI wave, however “a lot of this will likely show a misallocation of sources,” stated David Owen, chief economist at Saltmarsh Economics. “In the end, a lot of the advantages will go to the customers of the know-how (elsewhere), not the early-stage innovators.”

Many economists additionally highlighted dangers from US commerce protectionism, restrictive immigration insurance policies, fiscal imbalances and political instability that would ultimately undermine productiveness development. 

US productiveness beneficial properties from commerce “have been traded away for chump change tariff revenues”, warned Robert Barbera, director of the Johns Hopkins College Middle for Monetary Economics.

Jonathan Portes, professor of economics and public coverage at King’s Faculty in London, warned {that a} “poisonous mixture” of tariffs, an erosion of the standard of US authorities administration and anti-immigration coverage would “over time do vital harm to the US financial system”.

Extra reporting from Olaf Storbeck, Claire Jones and Thomas Hale