Economists See Slow US Growth, Stubborn Inflation Well Into 2026
Michelle(Aug 29): Economists anticipate ho-hum US economic growth for the remainder of the year and well into 2026, with steady, tariff-driven inflation buffeting consumers.
(Aug 29): Economists anticipate ho-hum US economic growth for the remainder of the year and well into 2026, with steady, tariff-driven inflation buffeting consumers.
Gross domestic product is now set to grow 1.1% in the second half of the year, a downshift from average growth of 1.4% during the first six months, according to the latest Bloomberg monthly survey of economists. Consumer spending, the economy’s primary growth engine, is also seen expanding at a 1.1% pace in both the third and fourth quarters.
At the same time, economists expect core inflation — measured by the personal consumption expenditures price index — will top out at an average of 3.2% in the fourth quarter. While year-on-year inflation is expected to gradually ease through 2026, it will remain above the Federal Reserve’s 2% target.
The results underscore expectations that higher import duties imposed by President Donald Trump will feed through more broadly into consumer prices and only gradually dissipate next year.
The Aug 22-27 survey of 79 forecasters points to an economy that will continue to adjust to the effects of the president’s trade and investment policies that he hopes will spark stronger growth. It also indicates the Fed will remain challenged by stubborn price pressures and uninspiring economic activity.
Fed chair Jerome Powell last week said the effects of higher tariffs on prices is “now clearly visible,” but he carefully opened the door to an interest-rate cut in September given the greater risk the job market could falter. Economists in the Bloomberg survey expect the unemployment rate to rise to 4.4% in the fourth quarter and stay there through most of 2026.
Still, forecasters now put the chances of a recession in the next 12 months at 32%, the lowest since March. While overall economic growth is expected to be modest, respondents see an acceleration in the growth of business investment through 2026.
The Bureau of Economic Analysis reported on Thursday that the US economy expanded in the second quarter at a slightly faster pace than initially estimated, helped by a bigger increase in intellectual property products and business equipment.
