There is reason for optimism regarding the US economy’s prospects. Key to this optimism is the ability of the economy to generate enormous productivity gains. The productivity of non-financial businesses has risen at a robust 2.5% per annum pace over the past decade and over 3.5% during the past five years. While a variety of factors are fueling these gains, most importantly is the rapid incorporation of new information technologies across businesses and industries.

The benefits of these productivity gains are evident in the surging profitability of US businesses. Profit margins have never been wider. Soaring profitability and cashflow have also allowed businesses to shore up their balance sheets. Corporate liabilities are barely growing and given still very low interest rates, corporate debt burdens are falling. US businesses have the financial wherewithal to invest and hire and they are increasingly doing so.

For the first time since the late 1980s, no significant global economy is experiencing a recession. China, India and the rest of southeast Asia are enjoying booming economies, while even the long-pressed Japanese and continental European economies are now expanding. US exports are currently expanding at a double-digit pace.

No global relationship is, and will continue to be more important to the US, than that with the United Kingdom. Merchandise trade between the two nations amounts to some $80bn annually; more than doubling over the past decade. Tourism and trade in financial and other services amounts to an additional $40bn. Unlike trade between the US and many of its other major trading partners, USUK trade is much more evenly balanced.

While trade between the US and the UK is important, the investments each nation makes in the other is unparalleled. Each year, UK businesses invest as much as $200bn in US non-financial assets ranging from manufacturing facilities to office towers. This is up from $125bn annually a decade ago and less than $50bn two decades ago. Current direct investment amounts to approximately 15% of all overseas investment in the US, making UK investors far and away the largest investors in this nation.

US investors are making similar commitments in the UK, accounting for close to 40% of all overseas investment in the UK. This investment is supporting a substantial number of jobs in both nations, with approximately one million Americans employed by UK companies in the US, and even more Britons employed by US companies in the UK.

UK investors snap up close to $200bn in stock and bonds issued each year by US businesses and government. This investment has been vital in supporting US stock prices and keeping US interest rates low. It also reinforces the stake UK investors have in the success of the US economy. US investors have a similar stake in the UK’s economic fortunes.

The economic relationship between the US and UK is set to only deepen. With concerns regarding global terrorism likely to remain high for sometime to come, US businesses will look to the safety and comfort of their long-standing UK links. For US investors, recent events have raised the risks involved in investing in other parts of the global economy.

US communities also increasingly understand that their future economic success is dependent on being more globally oriented, and there is no easier partner than a British business. Numerous state economies have been hit The special relationship between the US and UK is seemingly set to become only more special. As the US and UK both increasingly look outward for economic growth, they will increasingly look to each other.

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