17.11.2025
Economic growth in the United States is projected to remain robust but to moderate compared with recent years. After a rebound in 2025-Q2 and 2025-Q3 supported by solid consumption, a narrower trade deficit and strong AI-related investment, real GDP growth is forecast to slow to 1.8% in 2025 amid a gradually weakening labour market and the fallout from a prolonged government shutdown. Growth is projected at 1.9% in 2026 and 2.1% in 2027, supported by accommodative fiscal and monetary policy, easing financial conditions and a recovery in employment growth, while the drag from tariffs is expected to fade over time. Inflation is expected to rise temporarily due to tariff pass-through and sticky services inflation, and to converge towards the 2% Fed target only in 2027. The general government deficit is projected to remain elevated, and gross public debt is set to keep increasing over the forecast horizon.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 1.8 | 1.9 | 2.1 |
| Inflation (%, yoy) | 2.8 | 3.0 | 2.3 |
| Unemployment (%) | 4.2 | 4.4 | 4.3 |
| General government balance (% of GDP) | -7.5 | -7.8 | -7.8 |
| Gross public debt (% of GDP) | 125.5 | 127.5 | 129.9 |
| Current account balance (% of GDP) | -4.1 | -3.7 | -3.7 |
Growth has moderated but is set to remain robust
After having slowed sharply in early 2025, real GDP rebounded in the following quarters, supported by solid consumption growth, a narrower trade deficit and strong AI investment. However, private consumption growth moderated compared with 2024 amid persistent policy uncertainty and slowing employment growth, while non-AI private investment remained subdued. Growth is expected to weaken again in late 2025 as the labour market softens and the economic effects of a prolonged government shutdown weigh on activity. In early 2026, higher tariffs and slower nominal wage growth are projected to dampen private consumption and investment, before domestic demand rebounds from 2026-Q2 supported by frontloaded fiscal support from the One Big Beautiful Bill Act (OBBBA) and easing financial conditions. Real GDP growth is forecast at 1.9% in 2026 and 2.1% in 2027, supported by continuing fiscal support, the effects of policy rate cuts and more dynamic employment growth.
Temporary surge of inflation due to tariffs
Headline inflation began rising again in 2025, reflecting rebounding goods prices and persistent housing and services inflation, with only partial pass-through of higher import tariffs to consumer prices by September. As tariff increases continue to feed into prices, inflation is projected to remain elevated into late 2025 and early 2026, before gradually easing as the labour market softens and shelter and services price pressures lessen. Inflation is expected to converge towards the 2% Fed target only in 2027.
The fiscal deficit is forecast to remain elevated
The general government deficit is projected to decrease slightly in 2025, supported by higher tariff revenues, but to widen again in 2026-27 with the full effect of the OBBBA. Overall, the deficit is expected to remain very high throughout the forecast horizon, while general government gross debt is projected to continue increasing, reaching close to 130% of GDP by 2027.
Source: European Commission. European Economic Forecast, Autumn 2025.
