Author: Cathy Jabara
Senior Economist

U.S. gross domestic product (GDP) grew at an annual rate of 2.4 percent in 2014, higher than the 2.2 percent increase it experienced in 2013.1 Various factors contributed to this trend, including increases in personal consumption and business investment, and a smaller decrease in U.S. federal government expenditures.2 To support the continued U.S. economic recovery, the U.S. Federal Reserve continued to buy long-term securities and kept the target range for the federal funds rate at 0 to 0.25 percent in 2014.3

Total industrial production in the United States rose 5 percent during 2014, compared to 3 percent during 2013.4 Although industrial production increased in almost all sectors, it grew most strongly in the primary energy; oil and gas drilling; semiconductors and related electronic components; motor vehicles and parts; and business equipment sectors (see the Energy, Machinery, and Transportation Equipment webpages for more detail). Industrial production fell in the consumer products, communications equipment, and computers and peripheral equipment sectors (see the Electronics webpage for more detail).5 Unemployment in the United States decreased from 7 percent of the labor force in December 2013 to 6 percent in December 2014.6

U.S. trade flows in 2014 were affected by a modestly depreciating dollar in the first half of the year, followed by a sharply rising dollar in the latter half of 2014. The nominal trade-weighted value of the dollar appreciated 3 percent relative to the currencies of the broad dollar index7 from 2013 to 2014. However, the dollar rose 8 percent against the broad dollar index from July to December 2014, compared to a decline of nearly 1 percent from January to June 2014, following revised forecasts of U.S. GDP that reflected higher-than-expected economic growth.8 An increase in the value of the dollar generally lowers the cost of imported inputs and makes U.S. exports more expensive in foreign markets.

Another key determinant of the demand for U.S. exports is the performance of other economies. Overall, U.S. GDP grew more slowly than the 3 percent average growth rate for the world economy as a whole (table US.1).9 In particular, GDP in emerging markets and developing economies expanded more rapidly than that of the United States in 2014. For example, China’s GDP grew by 7 percent, and China was the third-largest export destination for U.S. goods in 2014. Other countries’ GDP in the Developing Asia10 region increased 7 percent on average as well. Further, the sub-Saharan Africa region also performed relatively well.

Table US.1: Real gross domestic product, change from previous year (percent)
World 3.3 3.3
Advanced economies 1.3 1.8
United States
2.2 2.4
2 2.4
Euro Area
-0.5 0.8
1.6 0.1
Emerging markets/developing economies 4.7 4.4
7.8 7.4
Latin America and Caribbean
2.8 1.2
1.4 2.1
Sub-Saharan Africa
5.2 4.8
Source: International Monetary Fund (IMF), World Economic Outlook Update, January 2015 (accessed February 26, 2015).

In contrast, other advanced economies’ GDP increased at a slower rate than in the United States. The average GDP growth rate for advanced economies in 2014 was only 2 percent. Canada, the United States’ largest export market, matched the U.S. growth rate of 2.4 percent, while euro-area countries,11 which include Germany, the United States’ fifth-largest export market, continued to experience slow growth at only 0.8 percent on average. GDP growth in Japan, the United States’ fourth-largest export market, fell to even lower levels, dropping to 0.1 percent in 2014 from 1.6 in 2013. The countries of Latin America and the Caribbean12 also expanded more slowly than the United States, at 1 percent on average, although Mexico’s GDP increased 2.1 percent. Mexico was the United States’ second-largest export market in 2014.

1 USDOC, BEA, “Gross Domestic Product: Fourth Quarter and Annual 2014,” February 27, 2015.
2 Ibid., table 2.
3 Federal Reserve, “Federal Reserve Issues FOMC Statement,” September 17, 2014. The federal funds rate is the interest rate at which depository institutions lend their excess deposits to each other overnight. Federal Reserve, “Open Market Operations,” n.d. (accessed March 5, 2015).
4 Federal Reserve, “G.17 Industrial Production and Capacity Utilization,” February 18, 2015, table 1. The percentage change in industrial production is measured from the fourth quarter of the previous year to the fourth quarter of the current year.
5 Federal Reserve, “G.17 Industrial Production and Capacity Utilization,” February 18, 2015, table 2.
6 USDOL, BLS, CPS database (accessed March 5, 2015).
7The broad index is a weighted average of the foreign exchange values of the U.S. dollar against the currencies of a large group of major U.S. trading partners. Federal Reserve, Foreign Exchange Rates—H.10 (accessed March 5, 2015).
8 Irwin, “What the Dollar’s Rise Tells Us,” October 8, 2014.
9 IMF, World Economic Outlook Update, January 2015. This document is the source for the data in this and the following paragraphs
10 IMF country grouping, composed of 27 countries: Afghanistan, Bangladesh, Bhutan, Brunei Darussalam (Brunei), Burma, Cambodia, China, Fiji, India, Indonesia, Kiribati, Laos, Malaysia, the Maldives, Nepal, Pakistan, Papua New Guinea, the Philippines, Samoa, the Solomon Islands, Sri Lanka, Thailand, Timor-Leste, Tonga, Tuvalu, Vanuatu, and Vietnam.
11 In 2014, the euro area included Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. IMF, World Economic Outlook Database webpage, (accessed May 28, 2015).
12 IMF country grouping, composed of 32 countries: Antigua and Barbuda, Argentina, The Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago, Uruguay, and Venezuela.