The global economy has been outperforming expectations for all of 2023, and a combination of disinflation, a recovery in manufacturing, household income growth and an end to rate hikes by the developed market central banks, leads some forecasters to predict that 2024 will be another strong economic year.

According to Goldman Sachs’ Macro Outlook 2024, global gross domestic product will wrap up the year beating the consensus forecasts of last year by 1% globally, thanks to a drop in core inflation from 6% in 2022 to 3%. The U.S. GDP will best forecasts by 2%, the firm said.

And although inflation is still higher than it’s been over the last 10 years, Goldman Sachs expects it to continue to drop, hitting the 2% to 2.5% range at the end of 2024.

“More broadly, we expect another year of growth outperformance across most of the economies we cover. We forecast 2.6% global growth in 2024 on an annual average basis,” Goldman Sachs said. “Most notably, our forecasts call for U.S. growth to again outpace its developed market peers, with country-level forecasts implying 1.1% outperformance (vs. consensus) in the U.S., 0.5% in Japan, 0.5% in Canada, 0.3% in China, 0.3% in Australia, and 0.2& in the Euro area.”

There are four primary reasons for this optimism, the firm said. First, Goldman Sachs sees real disposable income growth in the face of disinflation and strong labor markets. In the U.S., for example, the firm expects real income growth to slow to 2.75% in 2024 from 4% this year, but that should still be enough to support consumer consumption and GDP growth of at least 2%.

Second, now that monetary and fiscal policies are most likely finished with tightening, the drag on GDP is ending. Typically, the drag on GDP during a tightening cycle lags about two quarters, and therefore a smaller drag is expected in 2024.

Third, manufacturing should recover after a lackluster pace in 2023 as inventories-to-GDP ratios stabilize.

And fourth, the central banks believe they don’t need a recession to tame inflation, and therefore will try to avoid one, the firm said.

“Central banks will lose little time before pivoting to cuts if the growth outlook deteriorated meaningfully,” Goldman Sachs said.

Looking ahead, the firm continued, 2024 should offer better real returns to investors now that the global economy is out of the post-Great Financial Crisis environment of negative real yields.

“The transition has been bumpy, but the upside is that the investing environment now looks more normal than it has at any point since the pre-GFC era, and real expected returns now look firmly positive,” the firm said. “The yield outlook is one investors could only dream of for most of the period since 2008.”

But a period of “higher for longer” yields may reveal weaknesses in the U.S., such as lack of access to finance for smaller companies, and subdued mortgage, housing and commercial real estate activity.

“We do not expect these to threaten the overall economic outlook,” the report said. “The bottom line is that although we expect a broad range of developing and emerging market economies to avoid recession in the coming year, the case for U.S. growth outperformance looks stronger.”

10. Canada

In 2023, Canada ranked 10^th in GDP—with $2.118 trillion—the result of a strong banking sector, active mining, manufacturing and service sectors, and robust global trade. The nation is signatory to more than a dozen free trade agreements with 51 other countries.

Here, services account for 70.2% of the GDP, industrials for 28.2% and agriculture for 1.6%.

Roughly 75% of employment is found in the service sector. However, the forestry and petroleum industries continue to be top employers. With vast deposits of both natural gas and oil, Canada is a developed nation that is also a net exporter of energy, which is unusual.

Other areas that are key to this vibrant economy are fishing, manufacturing of automobiles and aeronautics, mineral export and agricultural products.

9. Brazil

With $2.127 trillion in GDP, Brazil grabs 9^th position on the list.

Brazil’s service sector is both the largest employer (71% of the workforce) and largest contributor to the country’s GDP (67%). The industrial sector, including manufacturing and mining, employs 19% of the workforce and represents 27.5% of the GDP, while agriculture contributes accounts for 10% of the labor market and 5.5% to the GDP.

The country’s most active industries are steel and petrochemical production, automobiles, aircrafts, computers and consumer durables. While this is a country rich in resources, it has lagged in infrastructure and industrial policy, leading it to struggle as a global trade partner. Of the 10 largest exports, eight come from agribusiness, which do not have much growth potential.

8. Italy

The sector composition of Italy’s $2.186 trillion in GDP has changed very little over the last decade. In general, services account for roughly 65% of the country’s GDP, manufacturing for 23% and agriculture for 2%.

Among services, banking, communication, tourism and hospitality are key areas. More than two-thirds of new businesses are in the services sector.

Manufacturing is the second-largest sector in Italy, with most companies being small and mid-sized focused on niche markets and luxury goods. Much of the manufacturing is in the north, where one can find machine, auto and aerospace production and shipbuilding along with clothing, leather products, textiles, furniture, home appliances and jewelry.

Italy’s third-largest economic sector is agriculture, and in particular small, family-run farms. Of the 1.6 million farms (two-thirds of these are found in Southern Italy), 99% average just around 20 acres. The largest crop is grains, followed by olive trees, vineyards and citrus orchards. About 25% of farmland is used to raise livestock.

7. France

The most-visited country in the world, France has a lot going for it, beginning with$3.049 trillion

In GDP and a diversified economy that is dominated by the services sector. Services in all its forms represents 78.8% of France’s GDP. Industrial comes in a distant second, at 19.5%, and agribusinesses account for 1.7%.

France was a large investor in nuclear power beginning in the 1970s, and today nuclear energy covers 78% of the country’s electricity production. Because of this, France is the smallest emitter of carbon dioxide among the world’s top industrialized countries.

Within services, tourism, fashion and luxury goods stand out among the less-exciting services areas like insurance, air transportation, banking, technology consulting and outdoor advertising.

Among France’s leading industrial sectors are telecommunications, pharmaceuticals, aerospace and defense, textiles, chemicals and automobile production.

France ranks sixth in the world for agriculture production and is the second-largest agricultural exporter, behind the United States. Wheat, dairy, beef, pork and poultry are the primary exports to poorer nations, while exports to the U.S. include cheese and wine.

6. United Kingdom

Consisting of England, Scotland, Wales and Northern Ireland, the United Kingdom lands 6th on the list of top 10 GDPs with $3.332 trillion.

Its service sector accounts for 82% of GDP, led by financial services as London is the second-largest financial hub in the world. Tourism and hospitality, wholesale and retail, and creative industries are other top GDP contributors.

Manufacturing represents about 10% of the economy, with aerospace, pharmaceuticals and automotive manufacturing being the most active sectors.

While it has been rumored that the Royal Family was responsible for a notable chunk of the country’s GDP, a cost-benefit audit conducted earlier this year by Brand Finance revealed that non-recurring costs/benefits, such as the coronation of King Charles III, netted $930 million, while recurring costs/benefits netted out at $241 million. The total benefit of $1.171 billion amounts to roughly 0.035% of the nation’s GDP.

5. India

Industry and agriculture, while not larger contributors to India’s $3.732 trillion GDP than services, employ the majority of India’s workforce, much more than in other countries on the Top 10 list. Services, the fastest-growing sector, account for 53% of the nation’s GDP, while industry contributes 28.2% and agriculture 18.8%.

In services, information technology and business process outsourcing have been among the fastest growing areas, while financial and banking services contributes 37% of the GDP alone. Retail, meanwhile, employs the most citizens after agriculture, mostly in small businesses, owner-staffed shops and street vendors.

Among industries, steel production, petroleum, chemicals, pharmaceuticals, pulp and paper, mining, manufacturing and textiles are among the most robust areas in terms of GDP contribution.

While 52% of India’s arable land is being cultivated, output is small compared with other countries. The landholdings of 70% of farmers averages less than 2.5 acres, often poorly irrigated. Lack of food storage and adequate distribution infrastructure means roughly a third of agricultural production is lost to spoilage.

4. Japan

Coming in 4th on the Top 10 GDP list with $4.231 trillion, Japan’s service sector accounts for 68.7% of its economy, with industrial contributing 30.1% and agriculture 1.1%.

Among services, big performers are wholesale and retail trade, finance and insurance, transportation and communication, real estate and public administration.

Within industrial, manufacturing contributes 18% to the GDP and focuses on high-tech and precision goods, including integrated circuits and robotics. Japan is the second-largest automobile manufacturer in the world and produces many of the hybrid vehicles on the roads today.

Agriculture is difficult due to the lack of arable land, but by terracing the terrain Japanese farmers have one of the highest yields per acre in the world. Rice production is the primary agricultural effort, and is both subsidized and protected. Smaller farmers are preferred here, as opposed to the large-scale industrialized farms of the U.S.

3. Germany

Taking 3rd place on the list with $4.430 trillion, Germany has boasted one of the highest trade surpluses in the world in recent years, thanks to 41% of its national output going to exports.

Of the countries with the Top 10 GDPs, Germany’s services industry is among the smallest, accounting for 68.6% of the economy. Industrial accounts for 30.7%, and agriculture just 0.7%, which also is among the lowest of the countries on this list. Some 99% of all companies are small and mid-size businesses, typically family owned.

Services, however, employ 74.3% of the workforce, with top industries being financial services, leasing, hospitality and transport. Industry and construction employ 24.2% of the population in such areas as chemicals, automobiles, machinery and electrical equipment.

2. China

The jump from 3rd place to 2nd is a big one, as China’s economy at $17.701 trillion GDP is roughly four times the size of Germany’s.

Compared to the other nine countries on the list, China’s services industry is the smallest, with services contributing just 52.8% of the economy. Industry accounts for 39.9%, and agriculture 7.3%, the highest of the countries on the top 10 GDPs list.

The most vibrant services are retail, hospitality, telecommunications, consumer internet, luxury goods and tourism.

In industrials, China is the leading country in manufacturing, producing one-fifth of the world’s total output. Major sectors are mining and ore processing, iron and steel, machinery textiles, petroleum, chemicals and fertilizers, cement, automobiles, toys, electronics and telecommunications and information technology.

And in agriculture, China is the largest producing and consuming country in the world. Key crops are rice, but also tobacco, soybeans, potatoes, tea, barley and oilseeds. Large investments in cultivation technology mean that while the country’s arable acreage is 75% of the United States’, it produces 30% more crop volume.

1. United States

The United States is the world’s leader in GDP, with 80.2% of its $26.95 trillion coming from services, 18.9% from industrials and 0.9% from agriculture.

Since 2000, however, GDP growth has been slowing, possibly due to aging demographics, a slowdown in population growth, lowered corporate investment, greater income disparity reducing demand, lack of major innovations and a decline in labor power. In 2012 the International Monetary Fund also found that the growth in the financial section was so robust that it was slowing overall growth, and a 20% reduction in the sector would be more balanced.

The U.S. is the second-largest manufacturer in the world, after China, and the largest manufacturer of airplanes. Other major industries are financial services, IT, petroleum, steel, automobiles, construction machinery, telecommunications, chemicals, electronics, consumer goods and arms.